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The impact of permanent and part-time remote work on Massachusetts income tax

On Behalf of | Jan 7, 2022 | Internal Revenue Service

 

The Covid-19 pandemic continues to impact the way state income tax is paid and withheld in various states. Massachusetts, a state where many non-residents previously commuted to work, finds some workers now working remotely, either permanently or part-time, from the state in which they reside. 

Pandemic emergency measures

During the pandemic, Massachusetts put in place emergency measures and issued final regulations under 830 CMR 62.5A.3 to ensure that employees working remotely in other states would continue to file the state taxes paid prior to the pandemic. This measure was meant to withstand until 90 days after the state of emergency in Massachusetts was lifted. 

This act was a point of contention for residents of New Hampshire because there is no income tax in this state. The state of New Hampshire filed suit against Massachusetts with concerns that Massachusetts would make this a permanent solution for remote workers. 

In June 2021, the U.S. Supreme Court denied a hearing on this matter. The Massachusetts Department of Revenue (DOR) announced that the temporary income tax rules for teleworkers that were put in place would end September 13, 2021. Non-resident remote workers will now be expected to navigate the state income tax laws of Massachusetts and their resident state.

Remote worker state income tax obligations

For some full-time non-resident remote workers, the end of the Massachusetts pandemic tax rules is good news. Any wages that are earned where the work is actually done will be taxed by that state. In the case of New Hampshire, no income tax will be paid on wages earned on work actually performed in New Hampshire since there is not a state income tax.

However, part-time remote workers, who will spend part of their time working in Massachusetts and part of their time performing work in their resident states, will have to obligate themselves to Massachusetts apportionment provisions. According to 830 CMR 62.5A.1(5)(a):

“When a non-resident employee is able to establish the exact amount of pay received for services performed in Massachusetts, that amount is the amount of Massachusetts source income. When no exact determination of amounts earned or derived in Massachusetts is possible, the income of employees who are compensated on an hourly, daily, weekly or monthly basis must be apportioned to Massachusetts by multiplying the gross income, wherever earned, by a fraction, the numerator of which is the number of days spent working in Massachusetts and the denominator of which is the total working days. The result is the amount of the non-resident’s Massachusetts source income.”

 

 

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