Q. I wonder what that means for me. Would the State of Nebraska consider that my service could have been performed in Nebraska?
A. Simple answer: yes.
If you work outside the state as a job requirement, you are only subject to Nebraska State income tax on the days you work in Nebraska. But if you work outside Nebraska for your own convenience, you are subject to Nebraska income tax on income earned from NE. Pennsylvania, New York, Delaware and Arkansas have the same rule.
Q. So, what do you do now?
A. You're probably not going to get a straight forward answer. We don't know how aggressively NE is enforcing and/or interpreting this. The fact that your employer didn't put NE in box 15, of your W-2, could be interpreted as you are NOT subject to NE tax. Tax wise, you probably come out even, as MI will give you a credit, or partial credit, for any tax paid to NE. But you'll have the cost ($40) of paying for software for a 2nd state and the hassle of preparing two state returns (prepare the NE return first, so the MI program can calculate the credit).
Here's another reference:
"The traditional rule is that employees are subject to income tax on income they earn while in a state. For this reason, if an employee lives in Iowa and works in Nebraska, they are subject to Nebraska income tax on their income.
Given this traditional rule, employees who leave Nebraska, but continue to work for a Nebraska based company remotely, generally do not expect to pay Nebraska income tax on their wages. However, the Nebraska Department of Revenue has, by regulation, instituted a rule commonly known as the convenience of the employer rule. Under this rule, service that could be performed in Nebraska, but is performed outside of the state only for the employee’s convenience, may still be subject to Nebraska income tax. The Department’s regulation states:
“If the nonresident’s service is performed without Nebraska for his or her convenience, but the service is directly related to a business, trade, or profession carried on within Nebraska and except for the nonresident’s convenience, the service could have been performed within Nebraska, the compensation for such services shall be Nebraska source income.”
Based on this rule, it is possible that the Department may claim that the work done by remote employees is still subject to Nebraska income tax – even though those employees work entirely outside of Nebraska.
In addition, the state where that employee resides may claim that the wages of that employee are subject to income tax in that state as well. To address this, companies should be considering and documenting whether their remote employees are only located outside of Nebraska for the employee’s convenience or whether a company business reason may exist for their location."
https://www.mcgrathnorth.com/remote-employees-can-have-significant-state-tax-implications#:~:text=Ho....
