Telecommuting from IL to NY


T

TQ

Hello,

I hold a position at an International company based in NY
and am currently telecommuting from Illinois. The corporate
HQ is in NY, and I work for them -- my bosses and group is
based in NY (and my paychecks list the corporate HQ address
as well). However, they are withholding taxes in IL.

I understand that this income falls under NYS law as income
sourced in New York and I will pay quarterly estimated taxes
(my employer will not switch the withholding). My question
is about Illinois. Reading the withholding publications and
Illinois administrative code, it seems that IL will not give
rebates for income "paid in Illinois". Whether or not
income is paid in Illinois first must pass a localization
test -- were the services provided in Illinois? I am
telecommuting and working on reports and spreadsheets via
VPN, so the servers are in NY, the reports are in NY. Since
it is a national company, I do talk to both corporate HQ on
the telephone/e-mail/IM as well as various warehouses &
facilities across the country.

I'm looking at IL Administrative Code 100.7010 for
clarification. Does this fail (a)(1)(a) (service is not
performed entirely within IL), (a)(1)(b) (service performed
outside IL is incidental to service outside IL), and
(a)(1)(c) (service is not localized but base of operations
is in IL)? Or do any these fit NY instead of IL in which
case it would qualify for (a)(3)? Is there any relevant IL
tax case / administrative hearing similar to this situation?

Also, the instructions for the Illinois rebate form state
that a letter must go out on company letterhead if the
amount withheld in IL is not "paid in Illinois". What
should the letter say?

I will talk to a IL CPA about these issues as well, but
appreicate the input. (I'll also call my congressman about
passing telecommuter tax laws to make things less
confusing!)

-- T. Q.
 
Last edited by a moderator:
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K

Katie

TQ said:
I hold a position at an International company based in NY
and am currently telecommuting from Illinois. The corporate
HQ is in NY, and I work for them -- my bosses and group is
based in NY (and my paychecks list the corporate HQ address
as well). However, they are withholding taxes in IL.

I understand that this income falls under NYS law as income
sourced in New York and I will pay quarterly estimated taxes
(my employer will not switch the withholding). My question
is about Illinois. Reading the withholding publications and
Illinois administrative code, it seems that IL will not give
rebates for income "paid in Illinois". Whether or not
income is paid in Illinois first must pass a localization
test -- were the services provided in Illinois? I am
telecommuting and working on reports and spreadsheets via
VPN, so the servers are in NY, the reports are in NY. Since
it is a national company, I do talk to both corporate HQ on
the telephone/e-mail/IM as well as various warehouses &
facilities across the country.

I'm looking at IL Administrative Code 100.7010 for
clarification. Does this fail (a)(1)(a) (service is not
performed entirely within IL), (a)(1)(b) (service performed
outside IL is incidental to service outside IL), and
(a)(1)(c) (service is not localized but base of operations
is in IL)? Or do any these fit NY instead of IL in which
case it would qualify for (a)(3)? Is there any relevant IL
tax case / administrative hearing similar to this situation?

Also, the instructions for the Illinois rebate form state
that a letter must go out on company letterhead if the
amount withheld in IL is not "paid in Illinois". What
should the letter say?

I will talk to a IL CPA about these issues as well, but
appreicate the input. (I'll also call my congressman about
passing telecommuter tax laws to make things less
confusing!)

Alas, you are between the proverbial rock (NY) and hard
place (IL).

Your interpretation o f the IL regulation regarding the
credit for taxes paid to other states is correct. IL will
not allow you any credit for tax you pay to NY on income
from services that you physically performed in IL. By IL's
lights, that's IL source income, and only IL has the power
to tax it on a source basis. By NY's light's it's NY source
income. You may be aware that NY's peculiar sourcing rule
has recently been upheld, for about the third time, by the
NY Court of Appeals (the highest court in NY), and the U.S.
Supreme Court declined to consider the case. (The
plaintiff's name is Huckaby, and he was a Tennessee resident
who spent some time in the employer's NY office but
otherwise telecommuted from his home.)

If you NEVER go to your employer's New York office, your
salary is not subject to this special rule. Arrange that,
if you can. That will get you off the NY hook. Otherwise,
you are truly double taxed with no relief from either side.
So sorry .... !!

Katie in San Diego
 
Last edited by a moderator:

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