U.S. Senate could solve a taxation nightmare | Don C. Brunell

Have you ever traveled to another state for your job, perhaps to attend a business meeting or a conference? Most people have. But few people realize that they may owe income taxes in that other state.

Have you ever traveled to another state for your job, perhaps to attend a business meeting or a conference? Most people have. But few people realize that they may owe income taxes in that other state.

In all, 41 states levy a tax on the income earned by nonresident employees during their time in the state, even if they’re just attending a conference. Each state calculates its tax differently — 24 states levy the tax from the very first day, while 17 others, including Oregon, Idaho and California, set thresholds of how long the nonresident employee can work before the tax liability is triggered.

Needless to say, this is an administrative nightmare for employers, particularly those with multiple locations or employees who travel frequently. It is the employer’s responsibility to calculate and withhold the taxes from their employees’ paychecks, and it’s the employee’s responsibility to file income tax returns in states that require it.

Complying with those obligations is complicated, costly and confusing, particularly for medium and small employers

Each state has different tax rates, tax triggers and varying notions of what constitutes income and how to define a work day. Calculating each traveling employee’s tax burden must be done by hand, because payroll systems are not built to allow withholding in multiple locations during the pay period. Cross checking travel vouchers can’t be done automatically either, because travel reimbursements and payroll are two separate systems.

Because of the difficulties involved, most employers are not in compliance. According to The Council On State Taxation, because the information must be tracked and collected manually, employers with workers who travel frequently would need to add two or three employees just to comply with the law, adding $150,000 or more to the budget.

Imagine if you had to deal with something similar.

Imagine that your property tax isn’t based on your house as a whole, but calculated at a different rate for each room. The tax rate for your kitchen is different than the tax rate for your living room, etc. In order to pay the appropriate amount, you must keep a log of how much time you utilize each room and calculate your tax based on the time and tax rate for each room.

Now imagine you have a spouse and four kids. To figure out your tax liability, you must keep track of how much time each of them spent in each room in your house and use that data to calculate your total property tax.

Impossible? That’s how many business owners feel.

Fortunately, there’s a solution. It’s called the Mobile Workforce State Income Tax Simplification Act. This complicated-sounding legislation greatly simplifies the task of tracking and withholding state income taxes for traveling employees.

The bill would establish a uniform national requirement that nonresidents must work in a state for more than 30 days during a calendar year before they’re subject to out-of-state income taxes. The bill defines what a work day is and, to prevent double taxation, it clarifies that employees can get a tax credit in their home state for income taxes paid to other states. Analysts have determined that the measure is largely revenue neutral for the states.

The measure has already passed the House with bipartisan support. On September 12, nearly 200 business leaders wrote Majority Leader Harry Reid, D-Nev., and the rest of the Senate leadership urging them to pass the legislation.

This bill is a simple fix to a complicated problem that preserves revenue for the states while saving money for employers. The Senate should pass it quickly and send it to the president for his signature.

 

Don Brunell is the president of the Association of Washington Business.

More in Business

Seattle’s misstep highlights need for new approach

Last week, Seattle’s City Council did an “about face” revoking the onerous… Continue reading

Washington’s expensive culvert court case

Too much money is spent in court where it should go to increasing the salmon population

Lt. Dan needs lots of helping hands

Gary Sinise formed the “Lt. Dan Band” in early 2004 and they began entertaining troops serving at home and abroad. Sinise often raised the money to pay the band and fund its travel.

New Enumclaw wine bar aims for broad audience

Bordeaux Wine Bar is scheduled to be open Wednesdays through Sundays.

Streamlining regulations makes more housing affordable

There were over 21,000 people homeless in Washington State last year.

New approaches needed to fight super wildfires | Don Brunell

Last year, wildfires nationwide consumed 12,550 square miles, an area larger than Maryland.

Skilled trade jobs go unfilled in our robust economy

Known as blue collar jobs, they routinely pay $45,000 to $65,000 a year or more.

Streamlining regulations helps Americans compete

The cost of regulations is a key American competitiveness issue. It is a major reason our companies re-locate to other countries and our manufacturers and farmers have difficulties competing internationally.

Water pressure mounting in West as population spikes

What is happening in California with water allocation disputes is a harbinger of what is to come in our state as well.

Railroads implementing positive track

While the investigation continues into the deadly AMTRAK derailment near Dupont, the clock continues to tick on the implementation of Positive Track Control (PTC). The deadline is Dec. 31, 2018.

Keep the holiday spirit all year long | Don Brunell

During the holidays, our thoughts naturally turn to giving — not just giving gifts, but donating our time and money to charities, disasters and community programs.

Finding balance in occupational licensing

Recently, the Institute for Justice (Institute) determined state licensing barriers for lower-income workers and aspiring entrepreneurs not only hurts people trying to establish themselves in a profession, but annually drives consumer prices up by $203 billion.