Taxes could go up this filing season for a significant number of Americans who worked at home during the pandemic, as states make competing claims to their paychecks.
Millions of people found themselves working out of their living rooms or bedrooms when lockdowns began late last winter, and very few were thinking of the tax consequences. Now, as employees prepare to file their 2020 taxes, they may find themselves stuck in a battle among states, with billions of dollars at stake.
The rules are complex and vary across the country. In some states, you're technically required to pay income taxes if you work there for just a day or two. In others, it’s 60 days. Employers don’t necessarily know the rules, and, since Covid-19 hit, many don’t even know where their workers are. Some states are already fighting in court over which jurisdiction gets to tax workers’ paychecks, and the Supreme Court has yet to weigh in.
“It’s a mess out there,” said Patrick Duffany, managing partner of tax at CohnReznick. “You need to have rules that taxpayers can comply with and you can administer.” Neither is the case right now, he said.
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