© 2020 American Payroll Institute, Inc. April 20, 2020 Volume 22 Issue 8 States Issue Nexus Guidance Due to COVID-19 Aare s a result of the COVID-19 outbreak, many employees now working remotely. If the state the employee is now telecommuting from is different from the normal work state, typically, it creates nexus for the employer and requires the employer to withhold income taxes for that state. Several states have issued guidance or passed laws relaxing these requirements temporarily. What is nexus? Nexus is a business connection and can be established by having a business presence in a state (such as an employee working from home). If the employer has nexus with a state, it is subject to the withholding laws of that state (as well as other tax laws in certain circumstances). Normally, an employer would have to adjust withholding if an employee was telecommuting from a new state. However, states such as New Jersey and Mississippi, have issued guidance stating that the employer does not need to adjust withholding if the employee is temporarily working from home due to COVID-19 (see PAYSTATE UPDATE, Issue 7, Vol. 22). State guidance The following states and localities have also issued guidance or enacted legislation addressing nexus: District of Columbia. The Office of Tax and Revenue (OTR) will not seek to impose corporation franchise tax or unincorporated business franchise tax nexus solely on the basis of employees or property used to allow employees to work from home (e.g., computers) temporarily located in the district during the period of declared public emergency and public health emergency, including any extensions by the Mayor. APA has reached out to the OTR for additional guidance on whether this also applies to withholding tax [OTR, Notice 2020-05, 4-10-20]. Indiana. The Department of Revenue (DOR) announced that it will not use an employee’s relocation, which is the direct result of temporary remote work requirements arising from and during the COVID-19 pandemic health crisis, as the basis for establishing Indiana nexus or for exceeding the protections provided by state law for the employer of the temporary relocated employee. The temporary protections provided under this guidance will extend for periods of time where: (1) there is an official work from home order issued by an applicable federal, state, or local government unit, or (2) pursuant to the order of a physician in relation to the COVID-19 outbreak or due to an actual diagnosis of COVID-19, plus 14 days to allow for return to normal work locations. If the person remains in Indiana after the temporary remote work requirement has ended, nexus may be established for that employer. An employer may not assert that solely having a temporarily relocated employee in Indiana under the circumstances described above creates nexus for the business or exceeds the protections of state law for the employer [DOR, Coronavirus Information]. Michigan. The Department of Treasury posted FAQs stating that nonresident telecommuters are not subject to city income tax. Ohio. During the period of the emergency declared by Executive Order 2020-01D, issued on March 9, 2020, and for 30 days after the conclusion of that period, any day on which an employee performs personal services at a location, including the employee’s home, to which the employee is required to report for employment duties because of the declaration will be deemed to be a day performing personal services at the employee’s principal place of work [H.B. 197, L. 2020]. Pennsylvania. If the employee is working from home temporarily due to the COVID-19 pandemic, the Department of Revenue (DOR) would not consider that as a change to the sourcing of the employee’s compensation for tax purposes, including withholding tax [DOR, Customer Support Answers (Answer ID 3739), rev. 4-10-20)]. Philadelphia, Pennsylvania. Nonresident employees based in Philadelphia are not subject to Philadelphia Wage Tax during the time they have been ordered to work outside of Philadelphia [City of Philadelphia, Guidance, 3-26-20]. Finding COVID-19-Related Updates for Wage Garnishments Pwage ayroll professionals deal with a broad range of withholding orders, including for creditor garnishments, student loan garnishments, and tax levies. Wage garnishments, sometimes referred to as wage attachments or income executions, can be issued by courts or governmental agencies, many of which independently administer them within certain federal and state requirements (see The Payroll Source,® §9.1). Because of that independence, trying to determine whether to halt withholding during the COVID-19 public health crisis can be difficult. The employer should start by referring to the garnishment order itself, to find the name of the issuing entity (e.g., court, agency), contact information, and withholding instructions (e.g., maximum amount that can be withheld). In some cases, the guidance provided by the
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