Telecommuting may be the future of the work place-at least that is what many experts think. Despite the recent decision of Yahoo’s Melissa Mayer to do away with telecommuters, many companies rely on the work and expertise of their “virtual” employees.
According to Forbes contributor Megan M. Biro, “Having remote and virtual employees is not only a way to get things done round the clock, without commuting, and with hard-to-find skill sets, but is also a way to meet the needs of employees who don’t want to or can’t live near the mother ship.”
It is clear that telecommuting benefits both employer and employee, but what many workers are finding is that they are actually losing money because they are being taxed twice for their work. If you are a contractor or long-term freelancer with a company, it is important to understand how the tax laws of your state or the state of your employer may affect your tax bill come April 15.
States like New York, Nebraska, Delaware and Pennsylvania have “convenience of the employer” laws that tax telecommuters two times. “Because telecommuters’ home states can also tax the wages earned at home, telecommuters are threatened with double taxation on that income: taxation first by their home states, and then a second time by their employer’s state,” said Nicole Belson Golubof, a telecommuting law specialist.
For example, a teleworker who works from home two days a week in West Virginia and commutes to their employer’s office in Pennsylvania the other three days would end up paying income taxes in Pennsylvania on 100 percent of their salary and West Virginia state taxes for the days they work in that state. The scary part is you may be required to pay taxes in Pennsylvania even if you only visit that office once a year.
There may be exceptions to such laws: a teleworker could have these taxes waived if they were able to prove that they telecommute out of “employer necessity” and that their home office functions as an actual workplace. These things are not only difficult to do, but are unlikely to be considered eligible by the Internal Revenue Service (IRS). If you are eligible for the home office deduction, make sure to keep meticulous records and all of your home office supply receipts.
Telecommuters must go above and beyond the requirements of an independent contractor to prove that their home office is tax deductible. Teleworkers must prove that they are using their home office for their employer’s advantage, not for their own benefit. While this seems easy enough, it is difficult in theory.
If you or someone you know has questions about home office deductions and tax burdens concerning telecommuters, it is important to contact a tax professional. The resolution tax lawyers at U.S. Tax Shield can answer your questions about back taxes and help you resolve your IRS debt. Take the first step today, and contact a certified tax resolution attorney at U.S. Tax Shield.