But Connecticut's 2018 legislation (addressed in our blog here), where Connecticut agreed to allow for resident tax credits for taxes paid to convenience-rule states, should nonetheless provide relief to a Connecticut taxpayer who continues to work from home for their New York employer, for example, in 2021. Of significant importance: the new law applies only to the 2020 tax year . Additionally, Connecticut taxes income of nonresidents working from home only when that taxpayer's home state applies a similar tax. There are a handful of states that impose a so-called (and misnamed) "convenience of the employer rule" to determine whether that state will tax the wages of a telecommuter. The states that have enacted such a rule include Connecticut (effective Jan. 1, 2019 for resident credit purposes), Delaware, Nebraska, New York and Pennsylvania. It is important to be aware of the change to Connecticut compensation sourcing rules and how it may impact you, since the proper allocation of income to Connecticut may change for 2019 and subsequent years because of the convenience of the employer test. Under this rule, if an employer is located in Connecticut, New York, Delaware, New Jersey, Nebraska, or Pennsylvania, or the employee's principal office of the . This is known as the "convenience rule." The seven states are Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York and Pennsylvania.

It is, however, anything but convenient for taxpayers.

Most states consider wages earned while working within their borders as theirs to tax. Other states with convenience of employer rules include Connecticut, Delaware, Nebraska and Pennsylvania. There has been some uncertainty as to whether New Jersey imposes a convenience of the employer rule in practice.

January 24, 2022, 8:43 AM. The challenge is that states imposing the convenience of the employer rule generally apply a stringent definition of what constitutes work from home for the .

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For more information on House Bill 6516, please contact Andrew Koutroumanis at (860) 297-5033. Several states, including Connecticut, deemed the pandemic to be "for the convenience of the employer," which means any Connecticut resident who paid income tax to another state as a nonresident employee may claim a tax credit against Connecticut income tax (H.B. The application of the traditional Convenience of the Employer Test in the current COVID-19 pandemic presents a number of unique considerations.

Enter the convenience of the employer rule. One way to eliminate the problem of necessity versus convenience is to assign the employee to an office in the employee's home state. The "convenience of the employer rule" (i.e., convenience rule) is a rule some states use for sourcing income earned by nonresidents who . However, a growing minority of states (currently Connecticut, New York, Pennsylvania, Arkansas, Delaware and Nebraska) utilize convenience of the employer (COE) rules to determine how nonresident remote employees should be taxed on their income. 3. STATE OF CONNECTICUT TAXPAYER SERVICES SPECIAL BULLETINDEPARTMENT OF REVENUE SERVICES 450 Columbus Blvd Ste 1 Hartford CT 06103-1837 . Connecticut will not impose its income tax on the wages that nonresident employees earned during tax year 2020 while working remotely in a state that employs a "convenience of the employer" rule, regardless of whether these nonresident employees were working remotely out of convenience or necessity.

On February 11, 2021, the joint Finance, Revenue, and Bonding Committee introduced raised bill S.B.

Connecticut has passed a bill that provides tax relief for 2020 only for employees working remotely who would have potentially had their wages taxed by two states (H.B. First effective in 2019, Connecticut's convenience rule applies only if the taxpayer's resident state applies a similar rule for work performed for a Connecticut-based employer. It is, however, anything but convenient for taxpayers. 2021HB-06516-R00-BA.DOCX Researcher: RP Page 3 2/24/21 . Fighting to make Connecticut a top state for business, jobs, and economic growth.

. The main exception is where the remote work location is necessary to perform their job duties.

New York employers have allowed many of their employees to telecommute and have flexible work schedules. Tax season is upon us and there are some key changes in 2022 including this year's deadline but most largely stem from pandemic-era tax legislation .

Conn. Gen. Stat.

Connecticut also recommends that taxpayers who spent too much time in the state consider filing resident returns under Connecticut's recent amnesty program, which was . In 2019, Connecticut adopted legislation that provided that for determining the Connecticut source income of a nonresident, the nonresident must include income from days worked outside Connecticut for that taxpayer's convenience, if that nonresident's state of domicile also employees the convenience of the employer test (such as New York). If you have any questions regarding the Connecticut telecommuting legislation or how this legislation might affect your business or you individually, please contact Marc T. Finer, Tax Partner, at 860-240-6096 or mfiner@murthalaw.com. The Connecticut Business & Industry Association is the voice of business in Connecticut, with thousands of member . It should be noted that the convenience of the employer rule imposed by Connecticut is unique, as Connecticut only imposes such tax on nonresidents that are residents of a state that also applies a convenience of the employer rule. 5 Connecticut enacted this income sourcing rule in response to other states that impose convenience rules, including Arkansas, Delaware, Nebraska, New York and .

The convenience of the employer rule allows some states to impose income tax on employees working remotely in other states for companies located within their borders.

This rule states that if the employer requires the employee to work in another . For more information, please contact: Matt Nick, Director, State and Local Tax Services Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvaniause the Convenience of Employer rule to at least some degree.

Convenience of the Employer Rule The convenience of the employer rule in Arkansas, Connecticut, Delaware, Nebraska, New York and Pennsylvania creates yet another layer of concern for double taxation.

6516, which provides that any Connecticut resident who paid tax to a state that uses a convenience of the employer rule will be allowed a credit. For taxable years beginning on or after January 1, 2019, Connecticut will apply the Convenience of the Employer test in determining Connecticut source income of residents of states that apply the same rule.

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including Connecticut, impose a "convenience of the employer" rule - essentially taxing the employee based on where they work, not where they live. With respect to the pandemic-like convenience rule, the new law requires that, in order to get the benefit of the credit, the employee needs to show that he or she performed work . Ronda Lee. 2020), Connecticut (for CT nonresidents domiciled in a state with its own convenience test), New York, Delaware, Nebraska, and Pennsylvania.

Employers should also be concerned about New York's sourcing rule. (Public Act 18-49, Sec.

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Some 110,000 Connecticut . The Department adopted the "bona fide employer office" test in 2006 as its way of applying the convenience of the employee rule to employees that work from home. Section 003.01C) . Although the rule is most well-developed in New York, other states, including Arkansas (which recently adopted the rule in a legal opinion), Connecticut, Delaware, Nebraska, and Pennsylvania, also apply the rule.

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It also records how many people hold jobs with Connecticut employers, whether they live in this state or another. Nebraska, New York, and Pennsylvania have issued guidance treating wages paid to employees working remotely during the pandemic as income earned at the employer's location (i.e., effectively treating teleworking days as convenience days). States with the convenience of the employer rule. Convenience Rule.

State.

This could . All those employees from Connecticut or New Jersey, who normally commute to Manhattan and are now sheltering in place, are facing the reality that their wages earned while sheltering in place will still be subject to taxes by the Empire State.

Many of these taxpayers are receiving a letter from the Connecticut Department of Revenue Services that includes a reminder of how Connecticut applies its 183-day rule. Some states have been enacting a so-called "convenience of employer" rule that subjects employees to state income taxes for the employer's state even if the employee has moved out of state for their convenience. Under this rule, an individual's work from outside of her employer's state is sourced to the employer's location unless the employee's work location is for the employer's convenience. And the gap between those two tallies has been widening steadily since 2013. convenience rule; Connecticut applies it only if the taxpayer's resident state applies a similar rule for work performed for a Connecticut employer.

Connecticut implemented its convenience of the employer test for tax years beginning on or after January 1, 2019.

This means that a New York resident working at home for a Connecticut employer will qualify under the convenience rule, since New York has implemented the convenience rule. If you live in Connecticut but work in New York, you end up paying income taxes in New York and receiving a credit from the state of Connecticut, known as the convenience rule.

'Convenience of the Employer' The controversy behind the lawsuit was the "convenience of the employer rule," a law in place in seven states, including . 6516) The bill provides .

But an email from the NJ Division of Taxation (March 2020) . Code 22-003.01C(1) (emphasis added). With respect to the convenience of the employer rule, the new law provides a credit even if the employee was obligated by necessity to work remotely from Connecticut.

With respect to the pandemic-like convenience rule, the new law requires that, in order to get the benefit of the credit, the employee needs to show that he or she performed work . New Hampshire requests that the Court invalidate a Massachusetts regulation with similar effect to the convenience of the employer rule. On May 6, 2020, New Jersey expanded on this nexus relief by temporarily waiving the sales tax nexus standard that can be met if an employer has an . New York's Convenience of the Employer Rule. 5 Connecticut enacted this income sourcing rule in response to other states that impose convenience rules, including Arkansas, Delaware, Nebraska, New York and .

To be exempt from the Convenience of the Employer rule and instead qualify as a remote, out-of-state employee, you'd need to be working away from your employer's location for their convenience. 12-711(b)(2)(C) "For purposes of determining the compensation derived from or connected with sources within this state, a nonresident .

Under recently enacted legislation and effective January 1, 2019, Connecticut income tax is imposed on nonresidents who perform their services outside of the state for the convenience of the employee. The seven states which have so-called convenience of employer rules, including the temporary Massachusetts' measure, are New York, Arkansas, Connecticut, Delaware, Nebraska and Pennsylvania . No. New York's "convenience of the employer" rule (the "Rule") is targeted directly at such situations, and can operate as a trap for the unwary in many cases. This Week's Developments

To add to the complexity, Connecticut, Delaware, Nebraska, New York, New Jersey, and Pennsylvania have a "convenience of the employer rule": if the employer is requesting that the employee work in a different jurisdiction, then, for state income tax purposes, the employee is subject to withholding based on the location of the second location. getty. to be based in one of seven convenience of the employer, or "convenience rule," states Arkansas, Connecticut, Delaware, Nebraska, New York, Pennsylvania . . .

But because the rule remains the same, employers in this situation should . The Connecticut legislation would provide credits for tax .

The convenience of the employer rule basically says that, "If you're working from home for your own convenience and not out of any employer necessity, the state's going to treat that day as a day .

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Convenience of Employer Test Generally, states will tax income that is earned within the state. On March 4, 2021, Governor Lamont signed H.B. However, Connecticut alters the sourcing rule for residents of states that apply the "convenience of the employer" sourcing rule.

In the six states where this provision already existedArkansas, Connecticut, Delaware, Nebraska, New York, and Pennsylvaniait is called the convenience of the employer rule, or just the convenience rule for short.

Massachusetts is a newcomer to the list, as it. The October 19, 2020 guidance restates the same bona fide employer office rule and offers no special rules or exceptions relating to the COVID-19 pandemic, which drove numerous New York-based employees to work outside the state (with many still continuing to do so). 873, which would allow Connecticut residents and part-year residents to take credits for income taxes paid to another state that has either a convenience of the employer rule (like New York) or a COVID-19 pandemic-like convenience rule (like . R. & Regs.

20(2 . 6516). Delaware

So under the new rules, Connecticut income tax is imposed on convenience days if: (1) the state from which they perform those services is within Delaware, Nebraska, New York, or Pennsylvania (because this new Connecticut rule is invoked only when nonresident employees are residents of a state also imposing a similar rule), and Beyond the Lockdowns. Six statesArkansas, Connecticut, Delaware, Nebraska, New York, and Pennsylvaniahad implemented so-called convenience rules prior to the . TSB-M-06(5)I Income Tax May 15, 2006 - 2 - Current application of the convenience of the employer test The instructions for Form IT-203-B, relating to Schedule A, Allocation of Wage and Salary Income to New York State, provide that: Work days are days on which you were required to perform the usual duties of your job. But your chances for double taxation go up if your employer is based in one of the five states -- Connecticut, Delaware, Nebraska, New York, and Pennsylvania -- that have what's called a . It is currently unclear whether the legislation will be revised to include 2021 and future taxable years as well. . Some states, including New York, have yet different requirements. However, because the Rule seeks to tax the wages of non-resident employees flowing from .

And, Massachusetts (a state referenced above) has also passed a similar temporary rule due to the COVID-19 pandemic that is effective through the .

With respect to the convenience of the employer rule, the new law provides a credit even if the employee was obligated by necessity to work remotely from Connecticut.

No. House Bill 6516 also states that, in determining whether an employer has Connecticut nexus, the Department of Revenue Services may not consider the activities of employees who worked remotely in the state due to COVID-19. .

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The new telecommuter rule applies only when nonresident employees are residents of a state imposing a similar rule.

Technically speaking, it was my employer's requirement for me to work remotely, but at the same time . Basically, the rule says that if an employee works from home for his or her own convenience, and not because of any requirement of the employer, those days worked at home will be treated as days worked at the employee's assigned work location.

means you have a substantial business reason for providing the meals and lodging other than to provide additional compensation to the employee.