Tuesday, March 8, 2016

What the Mobile Workforce Bill Means for You

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Do you ever travel out of state on business or pay employees who do? Depending on where you or your employees are traveling from and traveling to, chances are nonresident taxes should be withheld. In half of U.S. states this applies even if you’re only working in the state for a single day.

Is this news to you? Did you know that when your employer sent you to that training out of state you should have had nonresident state income taxes withheld from your pay? And that you should have filed a nonresident state income tax return? Most employees have no idea they’re on the hook for nonresident taxes when they travel on business. That’s because most employers don’t comply with out-of-state withholding requirements. For the companies that do comply, it can be a surprise for employees. Why wouldn’t a company comply? Primarily because nonresident taxes are extremely complicated.

The requirement to withhold might be based on the number of days you spend in the state. Or it might depend on how much money you’re expected to earn there. Where you’re traveling from matters as much as where you’re traveling to. Your home state might have an agreement with a neighboring state that lets you off the hook for nonresident taxes, but that agreement might not apply to one of your coworkers in a third state.

Imagine sorting that out for thousands of employees who travel all over the country. Compliance is so difficult that for some companies it is nearly impossible. By not withholding nonresident taxes, your company might be doing you a favor. For example, the average person coming to an educational conference like one put on by the American Payroll Association isn’t going to earn enough to owe any nonresident taxes. In fact, you might earn below the threshold required for even filing a tax return. However, if you want those withheld taxes back, or if you want to take a credit for them against your home state tax return you will need to file.

The American Payroll Association and its partners have long supported a bill in Congress that would establish a 30-day safe harbor against nonresident state income taxes when employees cross state lines for work. The bill is called the Mobile Workforce State Income Tax Simplification Act, or the Mobile Workforce Bill for short. This bill would allow millions of workers to travel on business without worrying that they’re going to get a tax bill at year’s end. You won’t have to worry that your company is risking penalties for not complying with state tax laws that are out of date and complicated.

So how can you get involved? Write a letter to your Congressional senators and representatives. The APA has already created a letter to help you get started. Visit the Mobile Workforce Coalition website and click the “Contact Congress” button. Enter in some simple information and then click the send button. The APA and the Mobile Workforce Coalition will take care of the rest and ensure your letter gets to legislators in Washington.

Check back with Pay News Now as we continue to track the development of this legislation.