Telecommuting Employees May Create Unforeseen Tax Burden on Employers

June 13, 2011
Telecommuting Employees May Create Unforeseen Tax Burden on Employers

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Many companies have either considered or currently have employees that work from home and many who may even work out-of-state.  The benefits range from giving employees flexibility within their schedule, providing for a family-oriented business, employee satisfaction, greater efficiency and productivity and reduced overhead costs.

However, while weighing the pros and cons of having employees telecommute, employers may find out the hard way that having an employee telecommuting from another state may have some tax consequences.

In an article released today in The Wall Street Journal entitled, “The Hidden Cost of Letting Workers Telecommute”, it states that back in March 2010, the Tax Court of New Jersey ruled back in March of 2010 that the company, TeleBright Software Corp. was “doing business” in the state of New Jersey, even though the company is based out of Maryland, since it has an employee telecommutes from New Jersey.

According to the article, Matthew Bobman, a certified public accountant from New York City, offers this advice:

Have the telecommuting employee resign, form a C or S corporation and invoice the ex-employer for work. But he warns that the former employer would have to pay the former employee more to cover new expenses and lost benefits. And, although it would be a challenge, states could still make a case for taxing the former employer.

If you are an employer with employees that are telecommuting out-of-state or you are an employee of a company located out-of-state, you may wish to consult a qualified tax professional regarding whether your company may be faced with tax consequences in the future.

This post is brought to you by the good folks at Dale Carnegie Training of Central & Southern New Jersey. We would love to connect with you on Facebook and Twitter @CarnegieJersey.

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