The convenience of the employer rule applies to certain taxpayers who work from home. It means you're taxed as if you work in your employer's state even if you don't.
You may need to file both a resident and a nonresident return, unless you live in a reciprocal state or a state without income tax.
The convenience of the employer rule may apply to you if you live or work in:
- Delaware
- Nebraska
- New York
- Pennsylvania
Additionally, Connecticut and New Jersey tax the income of nonresidents working from home only when that taxpayer’s home state applies a similar tax.
What factors would exempt me from the convenience of the employer rule?
Each state has its own guidelines, restrictions, and conditions regarding defining remote employees. To be exempt from the convenience of the employer rule and instead qualify as a remote, out-of-state employee, you'd need to be working away from your employer's location for their convenience rather than yours. This could happen for several reasons, including the employer needing employees that they can't attract in their home state or needing employees in multiple locations to serve clients around the country.
Other factors that might designate an employee as a remote worker for their employer's convenience include:
- A home office is a requirement or condition of employment
- The employer doesn't provide the employee with an office or regular workspace
- The employer reimburses the employee for substantially all home office expenses
- The employee has a bona fide business purpose for working at home (for example, to meet multiple project deadlines in the home state)
- The employee performs some core duties at home (for example, a stockbroker trades securities from home)
- The employer or worker regularly meets or deals with clients, patients or customers at home
