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State tax filing
@TomD8 wrote:
I am not sure NY's "convenience of the employer rule" applies to non-residents who never set foot inside New York.
Appreciate any comments!
Possibly. It appears the law impacts workers whose "primary office" is in New York. Here, we can consider at least 3 different fact patterns.
a. Employee has a regular office in NY but also works from home temporarily, even for long periods of time such as due to COVID.
b. Employee has an assigned office in NY but never actually works there.
c. Employee has no assigned office in NY and only ever works remotely.
Most of the online commentary I can find seems to address only condition (a).
NY Tax Law, § 632(b)(1)(B) says, in part, "Compensation for personal services rendered by a nonresident individual wholly without New York State is not included in his New York adjusted gross income, regardless of the fact that payment may be made from a point within New York State or that the employer is a resident individual, partnership or corporation. Where the personal services are performed within and without New York State, the portion of the compensation attributable to the services performed within New York State must be determined in accordance with sections 132.16 through 132.18 of this Part." (emphasis added)
That seems to indicate that income from case (b) and case (c) is not NY income.
Section 132.18 is the section that says that if the taxpayer lives outside NY but works for an NY company, that is considered NY income, but as you point out, it begins with "If a nonresident employee (including corporate officers, but excluding employees provided for in section 132.17 of this Part) performs services for his employer both within and without New York State..."
This does not directly conflict with section 632 above.
NY's web site has this FAQ
My primary office is inside New York State, but I am telecommuting from outside of the state due to the COVID-19 pandemic. Do I owe New York taxes on the income I earn while telecommuting?
If you are a nonresident whose primary office is in New York State, your days telecommuting during the pandemic are considered days worked in the state unless your employer has established a bona fide employer office at your telecommuting location.
Which, depending on the definition of a "primary office", could be stretched to include case (b), even though the law seems to say otherwise. The FAQ also refers to memo 06-5 which sets out the conditions for an employer to establish a bona fide office in the employee's out-of-state home.
So now, lets consider an expanded fact pattern (b1).
Employer hires employee to be a member of a particular division that is located in New York, and where the employer would provide an office if the employee moved, but the employee chooses to remain out of state and work remotely and the employer agrees. The employer does not take sufficient steps to establish a bona fide office at the employee's home under memo 06-05. The employee does not work in NY and has never previously lived in NY.
The tax department FAQ for 2020 would seem to indicate this is NY income and the employee must file a non-resident tax return. Section 632 would indicate the income is not taxable in NY. So now the question becomes, if the taxpayer treats it as non-NY income and does not file an NY return, is the taxpayer willing to take it to court if NY audits them?
But, let's consider a slightly different fact pattern, (b2), the same as (b1) above, except that the employee is required to travel to NY 1 day a year to company headquarters, to meet in person with their team, be evaluated, and so on. Even 1 day would defeat the "wholly without NY" clause in section 632, and now section 132.18 applies in full, and all the employee's income from the NY employer is NY taxable income on a non-resident return.
Or, suppose the employee moves to NY on December 30, same thing. If they are a part-year resident, then section 132.18 comes into play.
Looks like a tricky situation. Will the original poster here never be in NY on business? Not even for 1 day?
References
https://www.tax.ny.gov/pit/file/nonresident-faqs.htm#telecommuting
