The world has changed in the last two years, especially when it comes to employment. As more employees are enjoying the benefits of working remotely, there are several tax considerations and potential savings that should be considered.
Tax Considerations for New York City Employers
Employers should diligently evaluate whether their employees working remotely post-pandemic will yield tax savings on locally-imposed taxes. For example, New York City’s 4% Unincorporated Business Tax (UBT), which applies to New York City-located partnerships, is based on where work is done. However, if an employee of an investment partnership relocated to another state during the COVID-19 pandemic, then revenue generated from the work performed in that state could well be excludable from the UBT calculation.
Where are Employees Working From?
In recent professional surveys on the subject, most employees stated that they would be comfortable with employers tracking their location at the state and city levels for tax compliance purposes. Thus, employers ought to consider instituting some form of a reasonable employee tracking and reporting system (through software, smartphone positioning, or otherwise) for their remote workers. This will allow them to document employee work locations and potentially integrate the monitoring process with their tax calculation and payroll platforms, thereby achieving efficient and accurate tax withholding for the applicable jurisdictions.
MSPC can assist employers in identifying local tax savings opportunities, and assist in implementing a monitoring process that will be defensible in the event of a state taxing authority audit. Please contact your MSPC advisor for additional information.