We live and work in an interconnected, mobile economy. The modern workforce isn’t stationary—many people travel all over the country to do their jobs. Right now, employees who travel outside of their states of residence for business purposes are subject to onerous administrative burdens because, in addition to filing federal and resident state income tax returns, they may also be legally required to file an income tax return in every other state into which they traveled, even if they were there for only one day. These employees and their employers are forced to comply with a patchwork of confusing, outdated, and sometimes predatory nonresident state income tax laws.
The Mobile Workforce State Income Tax Simplification Act, a bill with bipartisan support and 153 cosponsors, would create a simple, streamlined system that makes it easier for employers and employees to comply with and pay nonresident state income taxes when they travel for work. To date, 295 supporters have joined us. We invite you to learn how the Mobile Workforce Coalition, in partnership with our Congressional cosponsors, proposes to fix the current system. (Want to send a letter to Congress? Click here.)
What can you do? Keep reading to learn more, or you can:
- Send a letter to Congress,
- Tweet Congress,
- Download a lobby packet to take on your Congressional visit,
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Here's the Problem
Employees who travel outside of their states of residence for business purposes are subject to onerous administrative burdens because they may be legally required to file an income tax return in every state into which they traveled, even if they were only there for one day. Employers are required to incur extraordinary expenses in their efforts to comply with the states' widely divergent withholding requirements for employees’ travel to nonresident states for temporary work periods. And in some cases, requirements for employees and employers aren't the same.
Keeping track of the requirements imposed by states on employers when it comes to withholding income taxes in nonresident states is incredibly complex due to the different requirements between states. In more than half of the states that have a personal income tax, employers are required to withhold tax from a nonresident employee's wages when they have worked in that state for only one day (maroon states in the map below). In many others, there are disparate rules, making it difficult for employers and employees to keep track of (teal states in the map below). In some of these states, withholding requirements are based on a dollar amount, some are based on the state's standard deduction, and still others are based on specific number of days. (Click here for details on teal states.)
As a result, compliance with these laws is often low.
Luckily, There's A Solution
The Mobile Workforce State Income Tax Simplification Act provides for a uniform, fair, and easily administered law and helps to ensure that the correct amount of tax is withheld and paid to the states without the undue burden that the current system places on employees and employers. The Act provides a uniform 30-day threshold before the liability attaches and withholding is required.
After 30 days, existing state laws will apply. Consistent with current law, the Act provides that an employee’s earnings are subject to full tax in his or her state of residence. Further, an employee’s earnings would be subject to income tax in the state(s) in which the employee is present and performing duties for more than 30 days during the calendar year.
Nonresident employees who visit a state and perform employment duties for more than 30 days during a calendar year are subject to tax—and employers are required to withhold taxes—in the nonresident state from the commencement of the duties performed by the employee in the nonresident state.
As under current law, nonresident employees who visit a state for longer than 30 days (and are therefore subject to that state’s nonresident filing and withholding rules) will still be able to take a credit against their resident state personal income tax liability for amounts paid to other states.
This legislation does not cover certain uncommon types of employees, such as professional entertainers, professional athletes, and certain public figures. They remain subject to each state’s laws.