State tax filing

@DanielV01 Precisely. So as it stands right now, an employee who performs no services in New York State is not subject to taxation under 132.18(a), confirmed by the case Matter of Hayes. 

Then comes along Matter of Thomas L. Huckaby. Huckaby works for a New York employer, remotely from his Tennessee home, but travels to his New York office 25% of the time. The court upholds the convenience rule, and the ability to tax 100% of his wages as New York source. 

There is one paragraph in Huckaby that I find to be most interesting: 

"In Zelinsky, we found the minimal connection called for by due process on account of the taxpayer's "physical presence in New York and because he . . . purposefully avail[ed him]self of the benefits of an economic market in" New York (Zelinsky, 1 NY3d at 97 [internal quotation marks omitted]). Here, petitioner objects that, read and applied literally, the convenience of the employer test would allow New York to tax 100% of the income of a nonresident who worked out of his employer's place of business in New York just one day a year. He argues that due process demands proportionality in order to prevent this presumed overreaching. Whether [*9]due process would countenance this particular result taxation of 100% of the income of a nonresident who spends a trivial amount of time working in New York is simply not before us. We conclude that the minimal connection required by due process plainly exists in this case where petitioner accepted employment from a New York employer and worked in his employer's New York office approximately 25% of the time annually. Moreover, the amount of time that petitioner spent working in New York25%is significant enough to satisfy any rough proportionality requirement called for by due process."

So we know that a taxpayer who works no days in New York cannot be taxed. We also know that a taxpayer who works 25% of his time in New York meets the minimal connection required to be taxed at 100%. The question is, what about a taxpayer who works something more than zero days but less than 25%? What is a "trivial amount" that the Court would deem covered under Due Process?  I suspect the Tax Department has spent the last sixteen years settling cases as to avoid further addressing and litigating this issue. As a result of the pandemic, and an increased remote work force, we may see that answer play out over the next several years. 

I would only advise a taxpayer to apportion their income to the State, if they worked somewhere between 0.01-25% in New York, if they fully understood the risks associated with that argument. I would also tell them to pay the amount in full, and file an amended return under protest with full disclosure. This way if the State ruled against them, they wouldn't be subject to interest and/or penalties. But it is still a "grey" area of the tax law.