As a remote worker in New York, you're likely aware that the state has specific tax laws that affect your income. You're considered a resident of New York for tax purposes if you're physically present in the state for 183 days or more.
New York has a tax rate of 4% to 8.8% on income, depending on your filing status and income level. This means you'll need to file a tax return with the state, even if you're not a resident of New York.
The state allows you to claim a deduction for business expenses, which can help reduce your taxable income. For example, if you work from home, you can deduct a portion of your rent or mortgage as a business expense.
Recommended read: Non-Habitual Resident
NY Tax Rules for Remote Work
New York State has a unique rule when it comes to taxing remote workers. The Convenience Rule, which has been on the books for decades, states that any work performed out of state that could have been done at an employer's New York office is considered a New York workday.
Discover more: Prepaid Expenses Tax Treatment
If you're a New York-based employee working remotely from another state, you may still be subject to New York State income tax. This is because the rule considers any work performed outside the state to be a New York workday, unless it's absolutely necessary to perform the work at another location.
A recent New York State Division of Tax Appeals ruling denied a taxpayer a refund of New York taxes paid on wages earned during the COVID-19 lockdown. The taxpayer worked from home in Pennsylvania, but the judge determined that they didn't work from home due to the employer's necessity, so they were subject to New York income tax on their wages.
To avoid any potential issues, it's essential to have a clear agreement with your employer that specifies your primary work location. This can help you understand your tax obligations and avoid any surprises come tax time.
Here are some key points to keep in mind:
- If the remote work arrangement is required by the employer, you may not owe New York State taxes.
- If working remotely is the personal choice and the employer has an office in New York, the state may still tax your income.
- Employees working remotely from another state should have a clear agreement with their employer that specifies their primary work location.
Non-resident NYC Income Tax
As a non-resident of New York City, you don't owe NYC income tax if you live outside the five boroughs and don't physically work in the city, even if your employer is based there. New York State taxes may still apply.
If you work for a non-NY employer, state taxes will likely apply based on your home state, not New York. This can be a good option to optimize taxation obligations.
To avoid NYC tax as a non-resident, it's essential to track your time working in New York. If you occasionally visit NYC for work, keep records of the days spent there, as the 14-day rule may exempt you from state tax if you work in New York for fewer than 14 days per year.
Some states allow tax credits to prevent double taxation on income earned from a New York employer. Review your home state's tax laws to see if this applies to you.
Here are some key actions to take to optimize your taxation obligations as a non-resident NYC worker:
- Work for a non-NY employer
- Establish a clear remote work agreement
- Track your time working in New York
- Review your home state’s tax laws
Employer Responsibilities
As an employer, it's essential to understand your responsibilities when it comes to remote work and New York State taxes. If you require your employees to work remotely from your New York office, their income may not be subject to New York State taxes.
You should have a clear agreement with your remote employees that specifies their primary work location. This can help avoid any confusion or disputes about tax liability.
To ensure compliance, consider having a written agreement that outlines the terms of remote work, including the employee's primary work location and any expectations for working hours or productivity.
If this caught your attention, see: Remote Work Employees
Background
The taxpayer in question is a professor at a law school in New York City, but lives in Connecticut. He worked from home in Connecticut for 143 days in 2019 and 365 days in 2020.
He filed an amended return for 2019 seeking a refund of tax paid to New York for those days, but it was deemed denied by the state. The taxpayer then filed an amended return for 2020, claiming all his law school salary as New York source income.
The taxpayer commuted to the law school in New York three days a week from January to March 2020, but then worked exclusively from home after the COVID-19 pandemic forced businesses to close.
Related reading: Do You Get Taxes Back from 401k Withdrawal
In A Nutshell
NYC doesn't tax non-residents, even if they work remotely for an NYC company. This is a big relief for remote workers.
New York State may still tax remote workers under the Convenience of the Employer Rule, so it's essential to understand the rules. This rule can be tricky, so it's best to seek professional advice.
If your employer mandates remote work, you may not owe New York state taxes. This is a great perk for remote workers.
The 14-day rule for New York non-residents may provide relief in the case of work performed in New York for fewer than 14 days per year. This could save you money on taxes.
Here are the key takeaways:
- NYC doesn't tax non-residents
- NY State may tax remote workers under the Convenience of the Employer Rule
- Mandated remote work may exempt you from NY state taxes
- The 14-day rule may provide tax relief for non-residents
Frequently Asked Questions
What is the convenience of the employer rule for remote work in NY?
In New York, remote workers are taxed on their wages in the state where their employer's office is located, not where they physically work. This is known as the convenience of the employer rule, which affects remote workers' tax obligations.
Featured Images: pexels.com
