April 27, 2021 LAW FIRM CLIENTS | New York directs auditors to review remote workers' returns In informal conversations, the New York State (NYS) Department of Taxation and Finance (Department) told EY that it has instructed many of its personal income tax/withholding tax auditors to pause their current audit cases to help review 2020 income tax filings of certain nonresidents. These nonresidents may have worked for New York-based employers and are seeking refunds of NYS income taxes based on having worked remotely in another state. NYS applies the "convenience of the employer" rule, under which an employee of a NYS employer may only receive an allowance for days worked outside NYS if the employer required the employee to perform the services outside of NYS. As a result, 100% of all wages earned by a nonresident taxpayer working for a NYS-based employer, either in NYS or working from home (or a location that is not a bona-fide company office in another state), would be considered sourced to NYS unless the employer required the work to be performed outside of NYS. The Department has sent some of EY's individual clients requests for:
Action items to consider
Implications It appears that NYS is trying to review certain nonresident 2020 filings very quickly to identify certain taxpayers who may owe additional NYS tax under the "convenience of the employer" rule because it has a large inventory of these filings. Accordingly, if you receive a request from the NYS Department as indicated above, consider the action items we provide herein. If you have any questions, please contact a member of the EY Indirect Tax team. ———————————————
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