Given the recent shift to remote work for many employees, you may be wondering if special rules apply from an income and withholding standpoint. In a recent update to New York FAQ’s, New York is not applying any special rules to employees working from home as a result of the COVID-19 pandemic. New York is taking the position that if an individual is a non-resident whose primary office is located within New York State, the days telecommuting during the pandemic are considered days worked in New York State unless the employer has established a bona fide employer office at the telecommuting location.
So, what is a bona fide employer office? Guidance issued from a 2006 Technical Bulletin (TSB-M-06(5)I) references what is called the “Convenience of the Employer” test. The memorandum states that the employee’s home office must either satisfy a (1) primary factor test or, (2) satisfy at least four of six secondary factors and, (3) three often “other” factors.
1. The primary factor test requires that the employee’s duties require the use of special facilities that cannot be made available at the employer’s place of business, but those facilities are available at or near the employee’s home.
2. The secondary factors, include:
- The home office is a requirement or condition of employment.
- The employer has a bona fide business purpose of the employee’s home-office location.
- The employee performs some of the core duties of his or her employment at the home office.
- The employee meets or deals with clients, patients, or customers on a regular and continuous basis at the home office.
- The employer does not provide the employee with designated office space or other regular work accommodations at one of its regular places of business.
- The employer reimburses substantially all of the expenses for the home office.
3. The “other” factors are:
- The employer maintains a separate telephone line and listing for the home office.
- The employee’s home office address and phone number are listed on the business letterhead and/or business cards of the employer.
- The employee uses a specific area of the home exclusively to conduct the business of the employer that is separate from the living area. The home office will not meet this factor if the area is used for both business and personal purposes.
- The employer’s business is selling products at wholesale or retail and the employee keeps an inventory of the products or product samples in the home office for use in the employer’s business.
- Business records of the employer are stored at the employee’s home office.
- The home office location has a sign indicating a place of business of the employer.
- Advertising for the employer shows the employee’s home office as one of the employer’s places of business.
- The home office is covered by a business insurance policy or by a business rider to the employee’s homeowner insurance policy.
- The employee is entitled to and actually claims a deduction for home office expenses for federal income tax purposes.
- The employee is not an officer of the company.
For most employees working remotely during the pandemic, it is unlikely that four of the six secondary factors will be satisfied, and because of the outdated nature of many of the “other” factors, three of the ten of these factors may also be difficult to meet.
These rules can become complex given the many scenarios for an employee/employer telecommuting arrangement. Please contact our experts today to learn more or discuss your specific situation.
The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We, therefore, make no warranties, expressed or implied, on the services provided hereunder.