When It Comes to Taxes, Being Tracked Can Be a Good Thing

With hundreds of millions of dollars at stake, states in need of revenue are not going to let the money go without a fight. “This has the potential to become as messy as you can envision it,” said Dustin Grizzle, a tax partner at MGO, an accounting firm. “States are going to say, ‘Hey you’re just using Covid to give you the ability to work remotely.’”

One thing is clear: the pandemic has, in fact, extended these types of tax debates to middle-income earners who would like to live somewhere else. At the center of the debate is a magic number: 183 days — half of the year, plus a day — which is the amount of time most states use to determine if a person has been somewhere else for tax purposes. (There are exceptions: Ohio requires residents to live outside of the state for only five months.)

Residency, though, is something you have to declare; it is not something you can establish by traveling. For many workers, the issue will be where their employer says their office is.

David R. Cohen, a lawyer who focuses on complicated litigation cases, had been traveling from his home in Ohio for decades. During the pandemic, he rented a place in Naples, Fla., with his wife and realized there was no reason to go back to Cleveland in the winter. After renting, he bought a house in Naples a few months ago.

“Covid proved everyone could work remotely,” said Mr. Cohen, who uses TaxBird. “It was at that point that I began to think about residency down here.”

His incentives went well beyond the weather: He reasoned that most of his cases involved multiple jurisdictions, so he was either traveling or working out of his home anyway.

That kind of shift has some states worried. There is currently a tax dispute between New Hampshire and Massachusetts that could end up in front of the Supreme Court. The central question: Where are people working for tax purposes when they are not allowed to go into an office in another state?

Article source: https://www.nytimes.com/2021/05/11/business/remote-work-tax-apps.html