In response to the COVID-19 pandemic, the New York Department of Taxation and Finance has finally issued guidance regarding tax liability for New York employers and their nonresident employees telecommuting from another state. The question for many months has been: “Do employees who usually work in New York but are telecommuting from other states (due do the COVID-19 pandemic) owe New York taxes for the wages they are earning while working outside the state?”

In 2006, New York adopted the “convenience of the employer” test. According to a 2006 bulletin, “Any normal workday spent at the home office will be treated as a day worked outside the state if the taxpayer’s home office is a bona fide employer office.” There are several factors in the bulletin that would determine if the employee’s residence is a bona fide employer office, but generally, an employee’s home office will not qualify as one, and therefore, an employee telecommuting from out-of-state would be subject to New York state income tax.

In a recent update to the FAQs on the New York Department of Taxation and Finance website, the answer to the above question is clear.

The Department seems to be taking the same position as it established in 2006, stating, “Your days telecommuting during the pandemic are considered days worked in the state unless your employer has established a bona fide employer office at your telecommuting location.” In other words, yes, employees will still owe tax to New York for the wages they are earning while telecommuting from outside the state and employers should continue to withhold New York tax from employee’s paychecks.

This brings up many concerns for taxpayers telecommuting from outside of New York State, one of which is double taxation. Taxpayers are usually eligible for a credit from their resident state for taxes paid to other jurisdictions. New Jersey offers a credit for taxes paid to other jurisdictions, so if you are a New Jersey resident who works in New York, you may claim a credit on your New Jersey tax return for the portion of New York income taxed by both states, thus avoiding double taxation on your wages.