Senate Democrats and Republicans have come together in support of a bill that would greatly ease the filing burden on employees who travel to multiple states to work during the year. Senators John Thune, R-S.D., and Sherrod Brown, D-Ohio, both members of the Senate Finance Committee, have reintroduced the Mobile Workforce State Income Tax Simplification Act of 2019. The bill, S.604, has 34 co-sponsors, including 17 Democrats, 16 Republicans, and one independent.
The bill would simplify and standardize state income tax collection for employees who travel outside of their home state for temporary work assignments. The bill would also help employers who must comply with withholding and reporting requirements. Current law imposes different reporting requirements in almost every state based on length of stay, income earned, or both.
The bill states that, “No part of the wages or other remuneration earned by an employee who performs employment duties in more than one state shall be subject to income tax in any state other than — (1) the state of the employee’s residence; and (2) the state within which the employee is present and performing employment duties for more than 30 days during the calendar year in which the wages or other remuneration is earned.”
Tax professionals who have to deal with multiple state filings for their mobile clients are hopeful that the bill will progress successfully through the legislative process.
Beanna Whitlock, a San Antonio-based preparer and educator, and former IRS director of National Public Liaison, said this would be a boon for taxpayers who regularly travel on business.
“My client Al, who works for a large national company, is currently being sent to various states during the year,” she said. “His W-2 reflects income earned in each of those states, with the proper withholding and sometimes even locality taxes. What a pain for both the employer and the employee! My client has to file a federal tax return, and a state return in each of the locations he worked. The cost is substantially more for him in my preparation, and every state has their particular nuances, such as states that have provisions for adjoining states.”
“This act would simplify reporting, and house the tax in the earnings in the state of residency,” Whitlock said. “With no state income tax in Texas, it actually costs my client to work in other states, and he receives no benefit from them.”
Michael Knight, a partner at Fairfield County, Connecticut-based Knight Rolleri Sheppard CPAs LLP, cited a musical touring group that spends one day in each state they visit.
“We have to file 30 state returns, so the proposed act would be tremendously relieving,” he said. “We do it for the group, but the people in the group have to do it individually, The 30-day threshold would obviate a lot of work — I may have to reduce my fee, but that’s OK; I’m goring my own ox, but it’s for the greater good.”
The proposed act does not cover professional athletes, professional entertainers, qualified production employees, or certain public figures. Knight believes it would not exclude the touring group from the 30-day test, since it defines a professional entertainer as “a person of prominence who performs services in the professional performing arts.”
“Neither the group itself nor its individual members rise to the level of ‘prominence,’” he said.
Why does the act exclude athletes and entertainers? “Simply because they make too much money and the states where they perform aren’t willing to give up the tax,” said Roger Harris, president of Padgett Business Services.
“It is disappointing that the act specifically excludes athletes and entertainers,” said Dr. John Karaffa of ProSport CPA, who serves more than 500 professional athlete clients. “Athletes were already targeted by the latest round of tax reform, where many of their common employee expense deductions were taken out of the Tax Code. This latest bill is just another example of where our elected officials have no problem with discriminating against professional athletes."
