GETTING PERSONAL: Telecommuter Taxes Could Get Simpler

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=90 BGCOLOR="#006699" TEXT="#080000" bgproperties="fixed" background="064285a1erlcgo.png"> <div> <FONT SIZE="5" COLOR="#FFCC66" FACE="Arial" ><B>The Telework Coalition</B></FONT><B>   </B></div> <div> <B>Enabling Virtual, Mobile, and Distributed Work through Education, Technology, and Legislation</B></div> <div> </div> </td> </tr><tr> <td valign="top" width=210 BGCOLOR="#FFCC66" TEXT="#080000" background="063d2c00dkelyh.png"> <div> <A HREF="index.htm" TARGET="_top" TITLE="The Telework Coalition"><U>Home</U></A></div> <div> <A HREF="id296.htm" TARGET="_top" TITLE="Membership Sponsorship Opportunities"><U>Membership & Sponsorship Opportunities</U></A></div> <div> <A HREF="id208.htm" TARGET="_top" TITLE="Our Sponsors"><U>Our Sponsors</U></A></div> <div> <A HREF="id270.htm" TARGET="_top" TITLE="TelCoa in the News"><U>"TelCoa in the 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Jones)--Telecommuters will be able to use employer-supplied </div> <div> computers for personal use -- and not have to pay for them -- if a proposal in </div> <div> President Bush's 2006 budget is passed into law. </div> <bR> <div> Currently, people working from home using computers, software and other </div> <div> office equipment provided by their employers are expected to keep a log of how much </div> <div> time they spend using the equipment for purposes other than work, whether </div> <div> it's surfing the Web for that birthday present they've been meaning to buy or </div> <div> checking personal e-mail accounts. </div> <bR> <div> About 3% of all private-industry nonagricultural workers in the U.S. have an </div> <div> employer-provided home personal computer, as do 4% of all private-industry </div> <div> white-collar workers, according to a March 2004 National Compensation Survey </div> <div> conducted by the U.S. Bureau of Labor Statistics. </div> <bR> <div> "It's a bookkeeping nightmare," says Cindy Hockenberry, an enrolled agent and </div> <div> tax-information analyst at the National Association of Tax Professionals, a </div> <div> professional organization in Appleton, Wis. </div> <bR> <div> The fair value of that non-business use is supposed to be added to the </div> <div> employee's gross income, on which the employee would have to pay taxes, adds Tom </div> <div> Ochsenschlager, vice president, taxation, for the American Institute of Certified </div> <div> Public Accountants. </div> <bR> <div> The new proposal, however, would eliminate that requirement, in an effort to </div> <div> reduce the burden imposed on telecommuters (at least the honest ones actually </div> <div> keeping logs) and their employers. Employer-provided computers and other </div> <div> equipment wouldn't have to be included in your income, so long as it's necessary to </div> <div> perform your work from home, even if the equipment is there only for standby </div> <div> use during work closures, such as during a blizzard or the threat of a </div> <div> terrorist attack. If the proposal were to pass, it would become effective for taxable </div> <div> years after Dec. 31, 2005, the budget said. </div> <bR> <div> Still, the computer-tax issue pales in comparison to another tax burden some </div> <div> telecommuters must bear. Most states tax income based on where you were when </div> <div> you earned your money. So if you split your hours between two different states, </div> <div> each state would only tax you on income earned in its territory. </div> <bR> <div> However, New York, for instance, may tax nonresidents working for New York </div> <div> companies on 100% of their income, regardless of where the work was performed. </div> <div> If the worker's state of residence also taxes the income earned at home, in </div> <div> their state, the telecommuter is taxed twice. While New York will issue a credit </div> <div> if it is a necessity to perform the work out of state (for instance, being a </div> <div> sales representative on the West Coast for a New York company), very little is </div> <div> actually considered a necessity, explains Nicole Belson Goluboff, author of </div> <div> "The Law of Telecommuting" and a lawyer specializing in telework issues. </div> <bR> <div> "This is a very significant issue for telecommuters," she adds. "With </div> <div> increasing frequency, companies are realizing that telecommuting is a vital part of </div> <div> contingency plans for (certain situations), whether it's a major power outage, </div> <div> a heightened terror alert, or transit strike, or any situation where most </div> <div> people would agree it would be more productive to have employees working from </div> <div> home. While Congress has demonstrated its interest in stepping in,(there is)no </div> <div> federal legislation as of yet." </div> <bR> <div> Thomas Huckaby, a computer programmer from Nashville who worked for a New </div> <div> York company, challenged the New York law and lost his first appeal last year. </div> <div> Huckaby spent roughly 25% of his working hours in New York between 1994 and </div> <div> 1995, though New York decided that 100% of his income should be subject to the </div> <div> state's income taxes. He took his case to the state's highest court, where oral </div> <div> arguments were heard in January; a decision is expected soon. </div> <bR> <div> "The judges clearly thought about the issue and had really good questions," </div> <div> said Peter L. Faber, who represents Huckaby and is a partner at McDermott Will </div> <div> & Emery's New York office. But, "it could really go either way." </div> <bR> <div> (Tara Siegel Bernard is one of four Getting Personal columnists who write </div> <div> about personal-finance issues ranging from new tax proposals to education-funding </div> <div> strategies to estate planning.) </div> <bR> <div> -By Tara Siegel Bernard; Dow Jones Newswires; 201-938-5288; </div> <div> tara.siegel@dowjones.com [ 02-09-05 1419ET ] </div> <bR> </td> </tr></table></body>