Will Remote Workers in NJ Get a Tax Break?
If you live in New Jersey, but worked in New York before the pandemic switched you to remote, will you get a tax break? It's not looking good.
The Supreme Court will not hear a New Hampshire lawsuit that challenged how remote workers are being taxed by Massachusetts. At the heart of the suit, was whether Massachusetts could collect income taxes from remote workers whose employer was located in MA, but were working from home in NH. Because many New Jersey residents pay similar taxes in New York, we signed on in support of New Hampshire's efforts.
Governor Phil Murphy said he was disappointed in the high court's decision, and was considering what comes next. After signing the new state budget Tuesday, Murphy vowed to continue the fight for New Jersey commuters and taxpayers.
New York and New Jersey have been engaged in aggressive taxation of out-of-state workers for decades, but New York also has a strict "Convenience of the Employer" rule. It requires New Jersey residents to pay taxes in New York even if working from home for their "own convenience." During the pandemic, working from home wasn't an option or a "convenience," it was a necessity. That's where the grey area comes in.
Had justices considered the New Hampshire case, and ruled in their favor, New Jersey could have argued New York collecting taxes from remote workers in New Jersey during the pandemic was illegal. They would still owe taxes to New Jersey, but the potential for a tax break was real. What comes next is unclear.
New Jersey State Senator Steve Oroho argues since working from home was an employees only option, it should negate New York's Convenience of the Employer rule. That would result, Oroho said, in lower income taxes for New Jersey residents, but "hundreds of millions - perhaps billions - of tax dollars" for the New Jersey treasury.