Update: Telecommuter Tax Due To COVID-19

Written by
Stephanie Vaz

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The Massachusetts Department of Revenue has provided an update to the ongoing tax speculation for non-residential workers now working from home due to the COVID-19 pandemic.

Due to social distancing measures and other restrictions, multiple states have declared states of emergency, resulting in businesses and employees adopting telecommuting arrangements. Insource has previously reported that the Massachusetts Department of Revenue faced criticism for continuing the taxation of out-of-state workers forced into the situation of remote working.

Now, the Department of Revenue has released “830 CMR 62.5A.3: Massachusetts Source Income of Non-Residents Telecommuting due to the COVID-19 Pandemic”. The final rule confirms that non-resident’s income derived from Massachusetts-based businesses will continue to be taxed by the state. Additionally, income received while telecommuting immediately before the state of emergency was announced will be subject to the same stipulation.

The regulation is effective through to December 31, 2020, or 90 days after the Governor gives notice that the state of emergency is no longer in effect – whichever is earlier.

Additionally, the ruling clarifies that the pre-existing Massachusetts source income apportionment rule outlined in previous ruling 830 CMR 62.5A.1 applies to the same employees. Non-residential workers must determine Massachusetts source income based on either the percentage of the employee’s workdays spent in Massachusetts during the period January 1 through to February 29, 2020, or the apportionment percentage used to determine the portion of the employee’s wages constituting Massachusetts source income on the employee’s 2019 return.

Prior to the COVID-19 pandemic, there were six states who followed the rule of “convenience of the employer”, which means being taxed based on the state the employer is located in. These states are as follows: Arkansas, Connecticut, Delaware, Nebraska, New York, and Pennsylvania. Now, Massachusetts temporarily joins this list with its new ruling.

To stay up to date with further developments from the Massachusetts Department of Revenue, be sure to follow Insource Insights. You may be interested in the latest update to PPP Loan Forgiveness here.

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