Front-line coronavirus workers may face surprise tax bills
States have different regulations governing nonresident taxes
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Some doctors, nurses and other front-line essential workers who crossed state lines to help those most in need during the coronavirus pandemic could be on the hook for taxes in those hard-hit states.
Workers, for example, who flew to New York City to staff up hospitals and treatment centers early on in the outbreak when city facilities were overflowing with sick patients are likely to be among those who face liabilities in the state as nonresidents.
Each state has different rules governing nonresident taxes. In some states, for example, tax laws take effect right away, whereas in others there is a grace period. Of course, a handful of states do not tax income at all.
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New York has higher income tax rates than a lot of other states across the country, which means even a credit that workers receive in their home state for the taxes paid there may not be enough to offset it.
New York Gov. Andrew Cuomo said during a press conference in May that the state could not afford to subsidize the tax bills for out-of-state workers because of the massive revenue shortfall caused by the pandemic. Nonresident workers are subject to taxes in New York after 14 days.
The complex patchwork of tax laws among states has become an issue not just for frontline workers who are fighting the crisis but also for other residents who are working from home to help prevent the spread of the virus.
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As a means to simplify the situation, lawmakers have introduced legislation that would establish a 30-day period where workers’ tax situation would remain “status quo,” meaning they would still be taxed as though they were going to their home office every day. South Dakota Sen. John Thune introduced a revised version of the Remote and Mobile Worker Relief Act that would provide a special 90-day exception for health care workers who voluntarily crossed state lines to help during the pandemic.
“Doctors and nurses who voluntarily crossed state lines to help during the pandemic – in some cases sacrificing vacation time to do so – should not be at risk of facing a much higher or unexpected tax bill as a reward for their service and sacrifice,” Thune said in a statement. “This situation is even worse for residents of states like my home state of South Dakota that don’t have a state income tax against which a credit can be claimed."
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It is unclear whether lawmakers will pass the legislation.
Meanwhile, essential workers continue to fight the pandemic as a host of states continue to see an uptick in confirmed cases, including Florida, Texas and Arizona.