Marcum 2021 Year-End Tax Guide

residence. Domicile generally refers to the place the taxpayer intends to make their permanent residence. Working remotely from a location other than one’s home state likely does not change the taxpayer’s domicile. Statutory residency is generally determined based on the number of days spent in the state (usually more than 183 days) and could also be based on various other factors, such as whether the taxpayer has a place of abode in the state. If a state determines that a taxpayer is a statutory resident in a state other than the taxpayer’s domicile, this could result in dual residency and both states may tax all of the taxpayer’s income. MARCUM RECOMMENDATION The tax impact of remote work and the potential for a determination of dual residency can be costly. Analyzing all facts and maintaining detailed documentation is critical to achieving favorable tax implications.

increased audit focus on resident taxpayers who are taking credit for taxes paid to other states. Pennsylvania: Pennsylvania issued temporary guidance for taxpayers working from home due to the COVID-19 pandemic, which expired June 30, 2021. Effective July 1, 2021, the pre-COVID income sourcing rules apply. South Carolina: Similar to Massachusetts, South Carolina issued an information letter in 2020 regarding the sourcing of income for nonresidents who are telecommuting. The emergency rules were similar to the convenience-of–the- employer rule. Those rules expired in September 2021. RESIDENCY CONSIDERATIONS Remote work is likely here to stay for the foreseeable future. This means individuals may be working from home in their resident state while the location of their employer may be in another state. Typically, a credit is allowed in the taxpayer’s resident state for taxes paid on income earned in another state. However, when a state has the convenience-of–the- employer rule, it may yield double taxation. Remote work may lead to an individual meeting the residency requirements of more than one state. Generally, states determine residency based on domicile or statutory

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