United States businesses have welcomed the introduction into the Senate of a bill, the Mobile Workforce State Income Tax Simplification Act, which would simplify tax reporting requirements for those workers who are employed in multiple state jurisdictions. It is very common for employees to perform their work in a number of different states within the US, and this can give rise to considerable tax compliance requirements for the employees and for the employer.
States currently have widely varying and inconsistent standards regarding the requirements for employers to withhold income tax and for employees to file personal income tax returns when travelling to a state, where they are non-resident, for temporary work periods. This inconsistency can cause confusion for employees and employers and increases administrative time and costs.
Employees who travel outside of their state of residence for business purposes are thereby subject to onerous administrative burdens because, in addition to filing federal and resident state income tax returns, they may also be legally required to file an income tax return in every other state into which they have travelled, even if they were there for only one day. Similarly, employers are required to incur extraordinary expenses in their efforts to comply with the states’ widely divergent withholding requirements for employees’ travel to non-resident states for temporary work periods.
Under the Mobile Workforce State Income Tax Simplification Act, an employee’s earnings would only be subject to tax in the state(s) within which the employee is present and performing employment duties for more than 30 days during a calendar year.