Do You Know Where Your Mobile Workforce Is?

Perhaps the better question is - Do you know where your mobile workforce is being taxed?

Currently, if a mobile worker travels to a state where he or she does not live, the worker may be expected to file an income tax return in that state.  This can become a huge burden to today’s business travelers and their employers who struggle to stay in compliance with up to 52 state tax routines.

And those 52 routines…it’s hard to find two that are alike!  One of the wonderful things about the United States is that each state is free to set its own tax laws.  But when it comes to payroll, a little standardization is also a beautiful thing.  Some states base withholding requirements on standard deductions, some look at flat dollar amounts, and others look at the number of days that the employee actually worked in the state.

So, what actually happens?  Hard-working, honest folks end up not complying with all the different states’ rules, because the rules are too complicated.

A bill has been introduced to the U.S. House Small Business Committee that addresses Mobile Workforce State Income Tax Simplification.  If this legislation passes, it will establish a thirty day period before a state can tax the wages of a nonresident working there.  After that 30 day period, the host state’s existing tax laws will take effect.  As is the case now, the employee will be subject to tax in his or her resident state, as well as the state where work is performed for more than 30 days in a calendar year.  Therefore the employer will be liable to withhold both the resident and nonresident state taxes.  The employee would be able to take a credit towards resident state income tax for any nonresident state income tax paid to other states.

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