If I travel to clients in another state for my job, do I owe taxes in Pennsylvania and each state where I perform work?

by Michael A. Gillen, CPA | Sep 19, 2018

I work for a computer services company and often work onsite for clients who are not in my home state of Pennsylvania. These engagements could last from a couple of days to a year. Do I owe taxes in each state where I perform work? Is there a time limit of working days that trigger taxes needing to be paid?

Presently, states have different and inconsistent rules, standards, and requirements for employees to file nonresident personal income tax returns when traveling on business to a nonresident state or states, and employers to withhold income tax on employees who travel outside of the employees’ state of residence for temporary work periods. The rules dictate the tax filing requirements of the employee and the tax withholding and reporting requirements of the employers.  

Some states have a “first day” rule, which means if you set foot in a state where you do not reside and work there for any part of one day, you are subject to state income tax in that state (Pennsylvania, Ohio, Virginia, and North Carolina are a few examples). Other states, such as New York, have a 14-day rule. Connecticut has a 15-day rule. Arizona has a 60-day rule. Additionally, some states do not assess income tax on a time-worked basis; rather, they assess it on an income-earned basis. To make it even more complicated, some states have entered into tax reciprocal agreements whereby an employee residing in one state but working in another does not owe taxes in each state the work is performed. Pennsylvania and New Jersey are examples of two such states. If two states have a reciprocal agreement and an individual resides in one of those states and works in the other, the individual will only be subject to income tax in the state where he or she resides. Again, your employer should understand and comply with the multistate reporting and withholding rules. Notwithstanding the employer’s responsibilities, you should consult with a CPA to ensure you are meeting your nonresident state tax reporting responsibilities, as you would be ultimately responsible in the event your employer is not in compliance. 

The Mobile Workforce State Income Tax Simplification Act may change all this. The U.S. House passed legislation in 2017 to simplify state income tax rules for employees (and employers) who travel across state lines on behalf of employers. The bill still awaits action in the Senate, where it has been introduced.

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Answered by: Michael A. Gillen, CPA, is director of the tax accounting department at Duane Morris LLP in Philadelphia.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
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