Photo credit: Jacobchristensen via Creative Commons CC BY-NC-SA 2.0Working from home during the pandemic
Despite a recent setback in the courts, Governor Phil Murphy said fighting over residents whose income has been New York taxed despite working from home in New Jersey during the coronavirus pandemic is still a priority.
But what exactly happens next – and how aggressive New Jersey becomes with its neighbor across the Hudson River – remains to be seen.
Last year, the Murphy government backed New Hampshire’s offer to get the US Supreme Court to prevent Massachusetts from taxing New Hampshire residents who were employed by Massachusetts-based companies but during the coronavirus pandemic of work from home.
A similar tax conflict has arisen between New Jersey and New York after New York continued to collect income taxes from thousands of New Jersey commuters during the COVID-19 shutdown, when most of the New York offices closed to prevent the spread of new infections prevent New Jersey residents from working from home.
$ 1 billion in tax credits
New Jersey officials have estimated that under current tax policies, more than $ 1 billion in home commuter tax credits can be paid out to offset income taxes New York levied on New Jersey residents during the pandemic.
The New Jersey legal brief referred to these estimates, also arguing that the diocese tax issues highlighted by the pandemic were “serious and of national concern.” But late last month the Supreme Court declined to open the case, leaving the issue largely unresolved.
When asked what options will be considered following the Supreme Court decision, a Murphy spokesman Darryl Isherwood said the government was “disappointed with the Supreme Court decision” but was not giving up the fight.
“New Jersey is being wrongly harmed and we will continue to look for ways to fight for the rights of our taxpayers,” Isherwood said, without giving any concrete options.
Much is at stake for some lawmakers
However, some state lawmakers appear to be fighting for a more immediate and direct battle with New York Governor Andrew Cuomo, a Democrat who has come under fire after a spate of sexual harassment allegations.
Lawmakers have argued that the current shift to remote work is likely to continue, at least in some form, long after the pandemic has subsided, and that there is too much at stake for New Jersey to ignore.
In New Jersey, income tax revenues are constitutionally designed to fund certain items in the state budget, including direct property tax relief programs and aid payments to K-12 school districts that can help ease pressure on local property taxes.
“This situation will never be resolved for the benefit of New Jersey residents if Governor Murphy continues to turn and pretend to be dead,” said Senator Steve Oroho, R-Sussex.
“Unless we fight back, this unfair New York taxation will never end,” Oroho said.
Is Remote Working a “Convenience”?
New York officials have consistently viewed remote work performed by New York company employees – even during the recent COVID-19 lockdown – as a “convenience” so workers’ incomes remain subject to New York tax laws.
But New Jersey tax laws generally require that income be “based on where the service or employment is performed.”
However, to avoid double taxation, the New Jersey Treasury Department has traditionally granted tax credits to residents on income taxes paid to New York.
That means New Jersey paid out tax credits during the pandemic, regardless of whether or not the workers actually earned their income in New York. There is no such tax dispute between New Jersey and Pennsylvania because of a long-standing mutual agreement that allows residents to pay income taxes where they live regardless of where they work.
Potential Tax Savings for New Jersey Residents
Last year, an Oroho-sponsored bipartisan bill was drafted in response to concerns about the taxation of teleworking and passed 35-0 by the democratically-controlled Senate.
Among other things, the bill requires the Treasury Department to conduct an in-depth review of the savings that New Jersey residents might see due to the different tax structures of the two states when the income they earned while working from home in New Jersey Jersey was taxed by Trenton instead of Albany.
The move also seeks to compel the Treasury Department to declare “efforts by the state to remedy the injustice of New York taxation on the income of New Jersey residents.”
Though the bill was hurled through the Senate, it remained stalled in the assembly, which is also controlled by Democrats. It is unclear what could hold things back in the House of Commons, and no action is expected before the November elections, when all 120 seats in the legislature are up for grabs.
Case of New Hampshire versus Massachusetts
Cecilia Williams, a spokeswoman for the spokesperson for the congregation, Craig Coughlin (D-Middlesex), said the chairman of the congregation had “been closely watching the New Hampshire v Massachusetts case” and was “disappointed that the court decided to resolve this important one.” Not to listen to the problem of the rights of states ”. . “
“At the same time, it is not yet clear what the future of remote work will bring,” said Williams. “During the summer and autumn, the congregation plans to participate internally in the discussion on this topic.”
A court motion filed by a key official in President Joe Biden’s administration in June suggested that individual taxpayers, rather than states themselves, might have better arguments when it comes to determining which state can tax income they receive at work earn from home.
But Republican Senator Oroho is among those calling on Murphy and other Democrats to increase urgency following the recent Supreme Court decision not to include New Hampshire’s remote work tax case.
Income tax based on the place of work
Oroho suggested that the Murphy government instruct employers to start apportioning income tax deductions based on where the work is actually done by a New Jersey resident who worked from home during the pandemic. A lawsuit against New York should also be on the table, the Senator said.
“Governor Murphy should draw a line in the sand with Governor Cuomo and make it clear that New Jersey is ready to take our own case to the US Supreme Court if necessary,” Oroho said.
But in a response, Treasury Department spokeswoman Jennifer Sciortino pointed to the state’s existing law, saying, “Without a change in the law, we must apply the law as it is written.”
“Employers cannot be required to withhold money from New Jersey taxpayers that results in credits for taxes paid in another jurisdiction,” she said. “Given the complexity of this legal matter, we risk doing more harm than good to our taxpayers if we rush to make short-sighted corrections.”