© 2020 American Payroll Institute, Inc. APA Requests Relief From States for Employees Temporarily Teleworking AIRS PA’s Government Relations Task Force Subcommittees on Issues and State and Local Topics combined efforts to ask for relief from the administrative burden of withholding income tax for employees temporarily teleworking in their home states because of the novel coronavirus (COVID-19). The requests included expanding existing exemption laws for out-of-state disaster recovery workers to all employees who are temporarily teleworking, creating new state exemptions for these workers, and asking Congress to enact nationwide relief. The need for relief The requested relief is for residents of a state who normally work in another state and have taxes withheld by their employers in the work state. APA said the individual tax burden is not likely to change because of the request (i.e., affected individuals already file income tax returns in both their state of residence and work state). The issue concerns income sourcing rules for workers who are temporarily working in a state other than their primary work location. Absent an affirmative announcement from state tax agencies, many employers would be required to change tax withholding arrangements for employees who are now required to work from home when their home state is different from their normal work state. Income sourcing rules require employers to withhold income taxes and report employees generally based on where work is performed. For temporary assignments, special rules and thresholds apply, often based on the number of days a worker is present in the state (e.g., 14, 15, or 30 days) and/or an earnings threshold. The stay-at-home orders because of the COVID-19 crisis prohibit employees from traveling. To the extent that employees normally commute across state lines, these temporary travel restrictions could trigger legal requirements to change the tax withholding settings for affected employees in payroll systems. APA’s requests for relief There are 16 states that currently provide an exemption from withholding for emergency responders who temporarily enter a state to work. APA asked for these states to extend these measures to all employees teleworking because of COVID-19. There are 26 states that require withholding for employees who work in one state and reside in another state. APA asked these states to issue an exemption for teleworking employees. Some states have already issued guidance regarding relaxed nexus requirements for telecommuting employees (see “State and Local News” in this month’s PAYROLL CURRENTLY). APA also wrote to congressional leaders asking for a measure to encompass all states. This request is different from APA’s effort over the past decade to pass the mobile workforce state income tax simplification bill. States currently have varying and inconsistent standards regarding income tax and filing requirements for employees who travel to a nonresident state for temporary work periods and for employers to withhold income tax on employees who travel outside of their state of residence for temporary periods. The mobile workforce bill would provide a uniform, 30-day threshold before tax liability attaches and withholding is required in a state. The COVID-19 situation is different. “The forecast for the duration of the health crisis is unclear, but work-from-home orders seem likely to persist beyond the threshold days/amounts that would normally require recognition and changes to state withholding,” APA said. Unless official government notices speak to existing laws and regulations, employers must continue to follow them. Because of the unprecedented stay-at-home orders, it can be especially difficult for payroll professionals to know which employees are working from home and to account for changes in state withholding. Adding to the administrative burden, many payroll professionals also are working from home, and payroll departments may be short-staffed. APA encourages all state tax administrators to consider issuing guidance concerning employees who are temporarily teleworking in their home state “to help reduce the extraordinary stresses that businesses are facing today.” APA Aids in Security Summit to Protect Payroll From Cyber Threats Ahelping PA members participating in the IRS’s Security Summit are to identify potential threats from cybercriminals. Cybercriminals often steal data by changing direct deposit details or other means of identity theft. APA partnered with the IRS and other participants in the Security Summit to share information on potential targets. Cybercriminals generally steal data through five categories: personally identifiable information, authentication, social engineering, insider threats, and third-party services. Here is an explanation of the categories and how payroll professionals can protect against identity theft. Personally identifiable information (PII). PII is a combination of information about people that helps to identify them, such as an address and social security number. May 2020 A Supplement to Payroll Currently, Issue 5, Volume 28
Next Page