![]() UHERO, however, said these issues are not insurmountable. A key concern with adopting the apportionment approach is that it will lead to not only increased employee and employer tax compliance costs (timesheet reporting, internal audits, etc.), it will also create demand for new and expensive systems of revenue administration. To better fit the new world of teleworking, the first solution UHERO provides is for stakeholder states to get together and forge an agreement on a formula to apportion income not strictly based on physical presence. UHERO noted that the current practice of taxing workers based on their physical presence at work is considered by many to be outmoded. Hawaiʻi and three other states expressed their support of New Hampshire. New Hampshire petitioned the nation’s highest court to rule whether it is constitutional for Massachusetts to continue to impose its income tax on New Hampshire residents who used to commute to work in Massachusetts, but now (because of the pandemic), work entirely from home in New Hampshire for Massachusetts companies. Growing dispute due to COVID-19Ī dispute between two states has made its way to the U.S. To avoid double-taxation, 41 states and the District of Columbia allow income taxes paid to another state to be credited against income tax liabilities in their home state. Non-residents are taxed on income from Hawaiʻi sources only, and the calculation of Hawaiʻi-sourced income is based on the number of days an employee is physically present in Hawaiʻi. In Hawaiʻi, residents are taxed on income from all sources (some may be taxed by other jurisdictions as well). and provides two possible solutions to the growing issues states are facing. A new University of Hawaiʻi Economic Research Organization ( UHERO) brief explores current policies on taxing teleworking income across the U.S. The result leaves states grappling with the issue of how best to tax the incomes of employees who live in one state but work remotely for employers located in another state. The COVID-19 pandemic has accelerated the growth of teleworking in the U.S. ![]()
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