New York State Taxes for MD Remote Employee

[Bigchillin21]

Quick question....

I am thinking about taking a full time fully remote position in New York. However, I reside in Maryland and have no interest commuting etc. Everywhere I am reading mentions NY has a strange rule about "convenience".

"If a nonresident employee of a New York employer telecommutes from his or her home outside of New York, days spent telecommuting are generally considered days worked in New York if the nonresident’s principal office is in New York. Since 2006, New York has taken the position that a “convenience of the employer test” applies in determining whether telecommuting days are non-New York days.[3] It is extremely difficult to satisfy this test because an employee must show that he or she was assigned by the employer to a primary work location at an established or other bona fide place of business of the employer outside of New York.[4] Thus, if an employee chooses to work at home (i.e., for his or her own convenience and not for the convenience of the employer), days worked outside of New York are treated as if the employee were physically located in New York."

If the job is 100% remote, do I still pay income taxes in NY and MD?

Thanks in advance.

[TomD8]

If you do not work a single day in New York, the convenience rule does not apply.

Per Hayes v. State Tax Commissioner, 401 N.Y.S. 2d 876, “A nonresident who works in another State but who performs no work in New York is not subject to New York State tax liability no matter for whose convenience or necessity he performs the work.”

https://casetext.com/case/hayes-v-state-tax-comm

If you are a non-resident of NY and your work will be performed 100% remotely from a location outside NY, then your income from that work is not taxable by NY.   If that's your situation, your employer should withhold MD taxes only.

If your employer does not withhold MD taxes for you, then you must make quarterly estimated tax payments to MD.

https://www.marylandtaxes.gov/individual/tax-compliance/estimated-tax-payments-for-ind.php

[Opus 17]

I believe @TomD8 has the final word on this, if I recall from past discussions.

Firstly, the general rule is that if you are working out of state for your convenience, you owe NY income tax.  You would file an NY non-resident return to report your NY-source income, and a MD resident return to report all your worldwide income. (Your other income, like investments, is not considered NY-source and is only reported in MD.) MD will give you a credit for out of state taxes you paid to NY, which reduces the effects of double taxation.  

If you are working out of state for the employer's convenience, you do not owe NY state income tax.  This might be that the company has no more office space for you, or they want you to be in MD for some business reason of theirs, such as to more easily interact with their MD customers.  It depends on the facts and circumstances of each job.

Then second, there is a narrow interpretation of the rule that says that if you never work inside NY, even one day, then NY can't tax you even if you are working remotely for your own convenience.  However, if you even work in NY one day a year, such as for training, or a monthly staff meeting that you are required to attend in person, then your job becomes sufficiently connected to NY state that all your remote income is taxable.  (This would apply if you work while residing in NY even temporarily, so if you traveled to NY for a work conference that was held at a hotel instead of the company offices, the rule still applies.)

The reason for this exception is that NY can only tax you if your job has a financial connection or nexus to NY.  Just working for an NY based employer is not enough, but if you work for an NY employer even one day inside NY borders, then your job for the whole year is "connected" to NY state. 

[Hal_Al]

One possible problem is whether your employer withholds NY state tax. If they do, you may have a hard time getting a refund from the NY Dept of Taxation and Finance. 

[Bigchillin21]

Thank you all for the quick and educated responses. I will ensure they only withhold MD income tax and ensure I will not work in NY for even a day.