State income tax withholding is generally required for the state in which the employee’s services are performed, and not for the state in which the employee lives. Income tax withholding when the employee is living & working from home in a state different than their normal base of operations. Here, we provide a glimpse of some state and local tax laws that employers and employees working remotely should consider. These new circumstances have raised unique issues regarding wage income sourcing, state payroll tax withholding, and income taxability for both employers and employees. If the employer required remote work sites, then where are the employee’s wages earned? For example, an employer’s regular work location may have been in New York, but their employees are working remotely from their vacation home at the shore in New Jersey. Now, employees can work in any place (i.e., their home, vacation home, parents’ home, etc.) in any city or state. To meet social distancing guidelines and protect their employees while also keeping business rolling, most companies have asked employees to work remotely from their own houses or locations convenient to their employees. Now, the physical location of businesses has less relevance.
As we all have witnessed over the last several months, the novel COVID-19 pandemic has changed the way the world works.
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