Interstate employment tax question

[Cardinal]

I'm not sure if anyone here knows anything about tax laws, or where I could go to get my question answered. Here goes:

How would any income taxes paid by the employer and/or employee differ between these two scenarios, if at all?

1. Living and working in NJ for a small, NJ-based company

and

2. Living and working in MA, but working for the same NJ-based company in the above scenario.

I really need to find out if there's any tax difference, and what that may be. If anyone knows the answer or where I could find the answer, I'd really appreciate it. Thank you.

[SteveLevin]

Ultimately, as an employee, you pay the highest of the two taxes between where you work and where you live. Your state of residence gives you credit for the taxes paid to your state where you work (note: this is your physical location -- working in a MA office of a Delaware company, for example, you don't pay DE taxes at all).

On the employer side, of course, if they have an MA office, they'd need to be licensed to do business in MA, pay the relevant fees, etc. If you are telecommuting that's typically not required...if the assuming is that they allow you to telecommute but that your "office" is in NJ.

Steve

[Cardinal]

Originally Posted by SteveLevin

Ultimately, as an employee, you pay the highest of the two taxes between where you work and where you live. Your state of residence gives you credit for the taxes paid to your state where you work (note: this is your physical location -- working in a MA office of a Delaware company, for example, you don't pay DE taxes at all).

On the employer side, of course, if they have an MA office, they'd need to be licensed to do business in MA, pay the relevant fees, etc. If you are telecommuting that's typically not required...if the assuming is that they allow you to telecommute but that your "office" is in NJ.

Steve

Thank you for your response. Just so I understand, I'd like to recap as I understand it:

If I were to live in MA and telecommunicate to the office in NJ, there shouldn't be anything in the tax code or laws which would increase taxes or require extra licensing or fees on the company. As far as the taxes the company would pay, there is no difference between me living in NJ or MA. As an employee, I would be responsible for any difference between the NJ and MA income tax rates.

If the company opened a branch office in MA, there would be extra MA fees and licensing for the company, allowing them to do business here.

I am thinking of going back to work for my old company. The way it would work is I would work from home, and use my computer, phone and fax to communicate with the NJ office. The office in NJ is the company's only office. If I understand you correctly, there's no reason the company should have to pay extra taxes or fees due to me being in MA, and the only increase in taxes should be on me, NOT the company. Am I understanding you correctly? Thank you again for your help.

[evomind]

Originally Posted by Cardinal

Thank you for your response. Just so I understand, I'd like to recap as I understand it:

If I were to live in MA and telecommunicate to the office in NJ, there shouldn't be anything in the tax code or laws which would increase taxes or require extra licensing or fees on the company. As far as the taxes the company would pay, there is no difference between me living in NJ or MA. As an employee, I would be responsible for any difference between the NJ and MA income tax rates.

If the company opened a branch office in MA, there would be extra MA fees and licensing for the company, allowing them to do business here.

I am thinking of going back to work for my old company. The way it would work is I would work from home, and use my computer, phone and fax to communicate with the NJ office. The office in NJ is the company's only office. If I understand you correctly, there's no reason the company should have to pay extra taxes or fees due to me being in MA, and the only increase in taxes should be on me, NOT the company. Am I understanding you correctly? Thank you again for your help.

hmmmm, that might change the parameters just a bit....
would you be a subcontractor? a statutory employee perhaps?
there are other tax ramifications involved here also regarding your home office and any variables i already brought up.

[Cardinal]

Originally Posted by evomind

hmmmm, that might change the parameters just a bit....
would you be a subcontractor? a statutory employee perhaps?
there are other tax ramifications involved here also regarding your home office and any variables i already brought up.

Not a subcontractor, just an employee who lives out of state.

[evomind]

Originally Posted by Cardinal

Not a subcontractor, just an employee who lives out of state.

hmmmm.....ok, if in fact you will be a w-2 employee, follow samlevins advice.

[SteveLevin]

As long as your desk resides in that NJ office, the company has no issues. lots of people work out on the road and only see their desks part of the time. Heck, one year I spent 270 days on the road in various places in the world setting up data centers.

Steve

[Cardinal]

Thanks for the information, everyone. This is exactly what I was looking for.

[TimMullen]

From personal experience (I worked in a field office for 6 years) - headquartered out of California, I was located in Wyoming (they moved me up there, and back again after it was over)...

As far as the company was concerned, I was on an extended temporary "business trip". For Payroll, the first year I paid California income taxes for the part of the year that I was physically located in California. Then after that, I was considered a Wyoming resident, and Wyoming rules applied to me (which was great because Wyoming doesn't have income taxes).

When I moved back to California, I had to pay income taxes to California for that period of the year that I was located in California.

Bottom line was that the money I earned while located in California I had to pay California income taxes on. The money I earned while in Wyoming (working for a boss and company located in California) I had to pay Wyoming taxes on - zero .

I don't know if the tax laws have changed in the last 15 years ago, but I doubt that it would be any different.

Come to think of it, in the past, I've worked on payroll systems here at work - the system has to maintain the "tax tables" for multiple states where people work. The company is headquartered in in California, but I work in an office in Virginia. We have employees that commute to Virginia from Maryland. The Virginia people pay Virginia state income taxes, the Maryland people pay Maryland state income taxes.

We also have offices in DC. Most employees commute from Virgina or Maryland to DC. Again, they pay their income to the state that they live in - which ticks DC off to no end because most of the people that work in DC (that they provide services for) commute to DC from other states, and the people don't pay any taxes in DC.

Of course your mileage may vary...