If you have employees who telecommute, make sure you consider the potential tax implications. Hiring someone who telecommutes in another state, for example, might create sufficient nexus to expose your company to that state’s taxes, includi ng income, sales and use, franchise, withholding, or unemployment taxes.

The employee might also be subject to double taxation if both states attempt to tax his or her income — the recent Supreme Court ruling in Comptroller of the State of Maryland v. Wynne addressed a similar issue, although in that case the taxpayers were not telecommuters but owners of an S corporation that earned income in other states.

The rules vary by state and also by type of tax — and become even more complicated for international telecommuters. So it is a good idea to review the rules before you approve an out-of-state telecommuting arrangement. If you are considering hiring telecommuters from outside your state, contact Whalen to help you assess the potential tax impact.

Copyright 2015 Thomson Reuters

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