Because the work-from-home motion shifts from stopgap measure to on a regular basis actuality, there are all types of economic questions to think about on each the worker and employer aspect. Brian Baker, a licensed public accountant and associate with HHM CPAs, has some solutions.
Q: One query I hear quite a bit is concerning the deduction of workplace bills for people who find themselves now working from residence. Can I write off my fancy new workplace chair or my jumbo pack of multi-colored sticky notes?
A: Sadly, should you’re an worker, the 2017 tax reform suspended the deduction for unreimbursed worker enterprise bills for years 2018 by 2025. If Congress doesn’t cross any extra legislation and this runs its course, then starting in 2026, that deduction will routinely come again. However who is aware of what’s going to occur between at times? For the second, this implies no deduction for the house workplace together with furnishings, gear and provides. Nonetheless, the deduction for self-employed people will not be impacted, so sole proprietors and different self-employed people can nonetheless declare their enterprise bills as they’ve up to now.
Q: What if I am an employer and I purchase provides or gear for my worker who’s working from residence?
A: If an employer buys provides for workers working at residence, these bills must be deductible by the employer. Employers also can reimburse workers for provides purchased by the worker. For instance, if an worker has an expense associated to their work as an worker — say they purchase paper for enterprise use — the employer reimburses them for the price of the paper. So long as its carried out by an accountable plan, the employer can deduct that expense and the worker doesn’t have to assert it as earnings. The worker does have to point out the enterprise connection to the expense, present a receipt. One other scenario could also be that the employer pays the worker $100 a month to cowl bills. If there is not any requirement that the worker pay again any extra quantity after bills, the complete $100 is handled as wages.
Q: In a neighborhood that sits on the border of a number of states, a few of us work in a single state and reside in one other. Or we did earlier than the coronavirus disaster despatched so many people residence to work. What occurs if I reside in Tennessee, the place there is not any earnings tax, however I work in Georgia, the place there’s? If I am now dwelling and dealing from my residence in Tennessee, do I nonetheless owe Georgia taxes? Every other state points which may get difficult?
A: In case you are an worker dwelling in Tennessee and dealing in Georgia, your employer usually must be withholding Georgia earnings taxes out of your wages and you’ll file a Georgia nonresident earnings tax return. Now that you’re working at residence in Tennessee, it’s possible you’ll be nonetheless be handled as working in Georgia below steering supplied by the Georgia Division of Income. The Georgia Department of Revenue website includes a FAQ on this subject.
Q: What if I am an employer in a single state who now has workers working from residence in one other? Does that change issues for me by way of taxes?
A: That is an space that can most likely affect many companies. Many states require companies to file earnings tax returns and withhold earnings tax from workers’ wages if the enterprise has a adequate reference to the state. Such a connection is perhaps established if workers are working within the state.
For instance, a enterprise might need an workplace in downtown Chattanooga and all workers have traditionally labored from this workplace. Effectively, what occurs if a number of the workers reside in Georgia and are actually pressured to make money working from home? Unexpectedly, the enterprise might be topic to taxation in Georgia and might be required to withhold Georgia earnings tax for the staff working in Georgia.
Regionally, each Georgia and Alabama have come out with steering offering some reduction on this scenario on Division of Income web sites for these states. If the necessities are met, the state is not going to topic the enterprise to earnings tax or withholding because of workers briefly working within the state. Tennessee has not supplied any steering on this subject at this level, so companies and workers ought to assume that the final guidelines will apply.
Q: Are there some other monetary implications of working from residence or having a home-based workforce which are essential to discover?
A: There are lots of different non-tax implications that companies ought to contemplate when considering whether or not to permit workers to proceed working remotely. A few of these profit the enterprise and a few profit the worker. Companies could save on the price of lease or constructing possession if much less area is getting used. Workers will profit from much less time and expense for commuting and can possible have a greater work-life steadiness because of this.
Q: Are there implications of the non permanent work-from-home scenario changing into everlasting? What is the threshold for declaring that the non permanent measure is now not non permanent?
A: For functions of the steering, I do not assume there’s any shiny line — I feel it is a matter of what your intent is. In case you attain the purpose the place you have determined, OK, we will do that association indefinitely, at that time you’ll want to bear in mind that call will result in tax implications. There’s a dialogue within the Georgia FAQ that’s extra detailed on what time interval they contemplate to be non permanent. In case you proceed to make money working from home, that might set off taxes. As soon as the worker and employer make that call that this will probably be greater than non permanent would be the level the place you must rethink the tax penalties.
In any case, that is an evolving scenario — we will get new steering or modified steering at any time. This has been altering so drastically over the past couple months, issues may change tomorrow.