As we were reading an article written by Noah Peterson at The Tax Foundation it caught our attention. We believe it will catch your attention, too! It is titled “How Are Remote And Hybrid Workers Taxed?” Here is what Noah Peterson writes:

“Working from home is great. The tax complications? Not so much.

Last year, 13 percent of full-time employees in the U.S. worked from home and 28 percent worked a hybrid model. Many of them worked in a different state than the one in which their employer was located. That’s millions of Americans who will face complicated income tax situations this filing season—some even getting taxed twice.

Where Is Income Taxed?

Generally, income can be taxed where you live and where you work. If those are the same state—as is typically the case with remote and in-person workers—then that’s where you’ll get taxed (with one exception; more on that below). But if you live and work in two different states—say, you live in New Jersey and commute into New York—then you could get taxed in both.

Thankfully, every state with an income tax offers a credit for taxes paid to another state. The catch: it won’t exceed the amount you pay on that income in your home state. So, your income wouldn’t be double taxed, but if the second state has higher income tax rates, you would be paying more than if you worked exclusively from your own state.

When Would I Be Double Taxed?

Five states tax people where their employer’s office is located, even if they work remotely and never set foot in the state. This is called the “convenience of the employer” rule, and Connecticut, Delaware, Nebraska, New York, and Pennsylvania have it, though they differ on the details.

If your employer is based in one of these states, but you’re working elsewhere for your convenience (not because your employer requires it), then you might pay income taxes both in the state where you live and work and in the state where your employer is based, without an offsetting credit.

For example, say your company is based in New York but you work remotely in California. Because you live and work in California, the state expects you to pay taxes on the income you earn there. But because New York has a convenience rule, it also expects you to pay taxes on the income you earn through your New York-based company. You’d pay income taxes to both states.

What If I Commute across State Lines?

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Background

Domestic corporations (corporations created under the laws of New York State) must pay income franchise and other taxes to New York State. The corporation pays the income franchise tax in exchange for the privilege of exercising its corporate franchise, doing business, employing capital, owning or leasing property, maintaining an office, or deriving receipts from activity in the state.

A domestic corporation that is in existence must continue to file New York State returns and pay any taxes or fees due regardless of whether it does any business, employs any capital, owns or leases any property, maintains any office, derives any receipts from any activity in this state or engages in any activity, within or without New York State, until it is formally dissolved. The process of voluntary dissolution brings the existence of the corporation to an end, and eliminates the corporation’s obligation to file returns and pay taxes and fees to New York State in the future. The dissolution process involves both the Tax Department and the New York Department of State.

A domestic corporation that voluntarily dissolves does not end its obligation to file returns and pay taxes and fees if it continues to conduct business, even if the business is carried on entirely outside New York State.

There are different procedures for the voluntary dissolution of New York State not-for-profit corporations and the surrender of authority by foreign business corporations.

Procedure For Voluntary Dissolution

Voluntary dissolution is generally a two-step process:

• Obtaining written consent from the Tax Department¹ (which will check to see if the corporation owes back taxes and if it has filed all its returns)²; and
• Filing paperwork with the New York Department of State, including a Certificate of Dissolution.

¹Written consent from the NYS Tax Department is not required for Limited Liability Companies.

² If the corporation has done business in and incurred tax liability to the City of New York, it  must request written consent to dissolve from the New York City Commissioner of Finance. Additional information is available on New York City Department of Finance’s website.

How To Get Consent From The Tax Department

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According to an article in the Heritage Foundation written by EJ Antoni, this exodus is a direct response to New York’s obscenely high taxes.

Compared with other states, New Yorkers:

• Pay the highest total tax burden and highest share of personal income (14%) in taxes.
• Endure the second-worst overall business tax climate.
• Face the highest individual income tax rate and income tax collections per capita.
• Pay the second-highest state and local corporate income tax collections per capita.
• Have the fourth-highest property taxes and local sales tax rate (on average),
• Pay the highest cigarette taxes and ninth-highest gasoline taxes.
• Pay the sixth-highest capital-stock tax rate.
• Are tied for third-highest estate tax rate.

And what do New Yorkers get for all these taxes? Roads smooth as glass? The best airports in the world? Trains running on time? Bulletproof electric grid and water infrastructure? Ample police to maintain safety and order? Not even close states the commentary written by the author Etoni.

Instead, New York City residents face some of the highest crime rates in the world, thanks to soft-on-crime policies from liberal politicians. And people everywhere across the state are threatened by a looming municipal debt crisis. Notwithstanding its sky’s-the-limit tax policies, New York has accumulated the highest state and local debt per capita in the nation.

And the future is not bright. When people flee the state, they take their jobs and money with them. That hamstrings future revenue collection for a state that has never learned to spend within its means. But the days of being rescued by tycoons like J.P. Morgan are long gone. Absent a federal bailout, both New York state and New York City are on a collision course with first grade mathematics—and bankruptcy.

If something of value changes hands, you can bet the IRS considers a way to tax it. Here are six taxable items that might surprise you:

• Surprise #1: Hidden treasure. In 1964, a married couple discovered $4,467 in a used piano they purchased seven years prior for $15. After reporting this hidden treasure on their 1964 tax return, the couple filed an amended return that removed the $4,467 from their gross income and requested a refund. The couple filed a lawsuit against the IRS when the refund claim was denied. The Tax Court ruled that the hidden treasure should be reported as gross income on the couple’s 1964 tax return, the year when the hidden treasure was found.Tip: The IRS considers many things like hidden treasure to be taxable, even though they are not explicitly identified in the tax code.
• Surprise #2: Some scholarships and financial aid. Scholarships and financial aid are top priorities for parents of college-bound children, but be careful — if part of the award your child receives goes toward anything except tuition, it might be taxable. This could include room, board, books, or aid received in exchange for work (e.g., tutoring or research).Tip: When receiving an award, review the details to determine if any part of it is taxable. Don’t forget to review state rules as well. While most scholarships and aid are tax-free, no one needs a tax surprise.
• Surprise 3: Gambling winnings. Hooray! You hit the trifecta for the Kentucky Derby. But guess what? Technically, all gambling winnings are taxable, including casino games, lottery tickets and sports betting. Thankfully, the IRS allows you to deduct your gambling losses (to the extent of winnings) as an itemized deduction, so keep good records.Tip: Know the winning threshold for when a casino or other payer must issue you a Form W-2G. But beware, the gambling facility and state requirements may lower the limit.
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