“…. let me come home. Home is whenever I’m with you. Ah, home, let me come home. Home is wherever I’m with you.” -Edward Sharpe and the Magnetic Zeros
Thanks to the pandemic most of us have been cutting hair at home, working out at home, schooling at home and running our businesses from home! Some of you started working at home seven months ago and are still going strong.
Now that we’re getting into Q4 we need to start thinking about our 2020 tax returns. Employer and employees need to keep a few things in mind.
Employers need to think about remote workers and tax presence. Having individuals established in a different state brings up the question of nexus. It it is determined that nexus exists, the state could levy taxes on the business and employees. If the business and employees are located in different states, employees could be subject to tax withholding in that state and the company may need to comply with that state’s payroll tax registration and corporate income tax requirements.
Employers need to know what state employees are working from. They need to monitor their time working in that location and know the guidance issued by the states employees are working in.
Employees are not able to write off home office expenses. Anyone who receives a W-2 at year end is considered an employee. Maybe they had to buy a desk, chair, and other office equipment to work from home. Employees are not able to write-off these unreimbursed business expenses and home offices on their personal returns.
This is due to the Tax Cuts and Jobs Act of 2017 which eliminated federal write-offs previously allowed under miscellaneous itemized deductions. This act went into effect in 2018 and things were much different back then pre-COVID.
This does not affect self-employed individuals and subcontractors.
Employees need to be sure they are tracking their time while working in a remote location and monitor their tax withholding on their paystubs.
“Moats and boats and waterfalls, alleyways and pay phone calls”….Some of the tax implications for working from home are not friendly to employees or employers.
Photo Cred to Suzannah Farr
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