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While stay-at-home orders are in place, most people around the country have dramatically changed the way they are living each day, including the way they work. Employees who work from home in a state other than their normal work state can lead to nexus in additional states for businesses.
In response to the increase in teleworking, some states are providing guidance on the impact of teleworking on nexus and withholding requirements specifically related to the COVID-19 crisis.
The worst-case scenario? Picture this: If an employee lives in one state and normally works in another, the employee may be subject to withholding in their state of residence and their regular work state, and they may establish nexus for the business.
Generally, employers are required to withhold tax from wages based on where employees work. Therefore, particularly during the current pandemic, employers should pay attention to which states their teleworking employees live in and consider where nexus may be established.
To date, the following guidance has been released by the states:
Even though some states have provided guidance on teleworking and nexus during COVID-19, we may not be able to count on it being the final guidance. Prior to making any changes in your withholding and reporting, we recommend that you take an inventory of where your employees are working and check with your Delap advisor to determine if any additional actions or filings may be required.