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October 23, 2020

New York issues guidance on the nonresident income tax liability to employees working temporarily outside of the state due to COVID-19

In its frequently asked questions (FAQs) concerning filing requirements, residency and telecommuting for New York state personal income tax, the New York Department of Taxation and Finance (the "Department") states that the rules set forth in its 2006 guidance on telework (Technical Services Division Memorandum TSB-M-06(5)I) continues to apply when employees are working remotely from outside the state due to COVID-19.

New York is one of several states that imposes what is called the "convenience of the employer" test in determining if an employee working from a home office outside of the state is liable for nonresident income tax. Under this test, nonresident income tax applies if the employee is working outside of the state for the employee's own convenience rather than the necessity of the employer and the employee spends at least one day in New York in the calendar year. Conversely, if the telework is out of the necessity of the employer, nonresident income tax does not apply.

The Department provided further guidance on this topic in Technical Services Division Memorandum TSB-M-06(5)I that, for years beginning on or after January 1, 2006, any normal work day spent at the taxpayer's home office will be treated as a day working outside New York if the taxpayer's home office is a "bona fide employer office." For an employee's home office to be considered a "bona fide employer office," it must meet either (1) the primary factor or (2) at least four of the secondary factors and at least three of the other factors as summarized in the chart below.

New York factors used in determining if telework is for the necessity of the employer

Primary factor

Secondary factors

Other factors

The home office contains or is near specialized facilities.

The home office is a requirement or condition of employment.

The employer has a bona fide business purpose for the employee's home office location.

The employee performs some of the core duties of his or her employment at the home office.

The employee meets or deals with clients, patients or customers on a regular and continuous basis at the home office.

The employer does not provide the employee with designated office space or other regular work accommodations at one of its regular places of business.

Employer reimbursement of expenses for the home office.

The employer maintains a separate telephone line and listing for the home office.

The employee's home office address and phone number are listed on the business letterhead and/or business cards of the employer.

The employee uses a specific area of the home exclusively to conduct the business of the employer that is separate from the living area. The home office will not meet this factor if the area is used for both business and personal purposes.

The employer's business is selling products at wholesale or retail and the employee keeps an inventory of the products or product samples in the home office for use in the employer's business.

Business records of the employer are stored at the employee's home office.

The home office location has a sign indicating a place of business of the employer.

Advertising for the employer shows the employee's home office as one of the employer's places of business.

The home office is covered by a business insurance policy or by a business rider to the employee's homeowner insurance policy.

The employee is entitled to and claims a deduction for home office expenses for federal income tax purposes.

The employee is not an officer of the company.

Ernst & Young LLP insights

The New York Department of Taxation and Finance has now confirmed that it is making no exception to its "convenience of the employer" test pursuant to telework necessitated by COVID-19. Under the current guidelines set forth in Technical Services Division Memorandum TSB-M-06(5), it will be difficult for most New York employers to conclude that employees working from home outside of the state due to COVID-19 are exempt from New York nonresident income tax and withholding.

The factors used in reaching a decision about the applicability of New York nonresident income tax to teleworkers are complex. Accordingly, business should consider consulting with their employment tax advisors in reaching a conclusion.


Contact Information
For additional information concerning this Alert, please contact:
Workforce Tax Services - Employment Tax Advisory Services
   • Debera Salam (
   • Kristie Lowery (
   • Kenneth Hausser (
   • Peter Berard (


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