Q. I am currently interviewing for a job in Massachusetts, but it will be a remote position in New Jersey with a home office function. Will I face any income tax liability in Massachusetts?
A. Yours has been a common question during the coronavirus pandemic as more people have been working from home.
The issue is now in the courts.
When the pandemic struck last year, Massachusetts issued an emergency regulation taxing nonresident employees who were working for a Massachusetts employer and who shifted to working remotely, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.
He said this impacted many New Hampshire residents who prior to the pandemic commuted into a Massachusetts workplace regularly.
“The state of New Hampshire filed suit against Massachusetts last October arguing that its neighboring state violated the U.S. Constitution in taxing nonresident employees working remotely,” he said. “This case is under consideration by the U.S. Supreme Court.”
Absent the Massachusetts regulation taxing remote workers being struck down as unconstitutional, you will face Massachusetts nonresident income tax liability on your wages paid to you by your Massachusetts employer, Becourtney said.
But the good news is that you will qualify for a New Jersey resident credit for the Massachusetts nonresident tax incurred, which could be as much as the entire Massachusetts tax incurred depending on your situation, he said.
Becourtney said last December, New Jersey filed a U.S. Supreme Court amicus brief in a case challenging the right of states to levy an income tax on nonresidents working from home in their states of residence.
“New Jersey estimated the cost of granting a resident credit for remote workers’ nonresident income taxes paid to New York, which like Massachusetts imposes tax on the nonresident wages earned by employees of New York-based employers working remotely to be as much as $1.2 billion for the year beginning in March 2020,” he said. “It would appear that as long as a state can impose nonresident tax on the wages of a remote worker, New Jersey will grant a resident credit.”
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Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.