While COVID-19 has impacted our lives in innumerable ways, one huge impact is on the way we work. Some workers have been fortunate enough to be able to transition from office life to working remote. While that presents its own set of challenges, one thing you may not think about is taxes and how that interacts with your wages. Massachusetts shares a border with five (5) different states and many people may live in one state and work in another. Some people are now working from home in one state, while their company is still “doing business” in another. This leads to a series of State-based tax issues and has resulted in New Hampshire suing Massachusetts over their tax policy.
Before the pandemic, over 80,000 New Hampshire residents commuted into Massachusetts on a normal workday. While New Hampshire has no income tax, New Hampshire residents working in Massachusetts would have to pay Massachusetts state income taxes, and that money would be withheld from their paycheck. However, an issue arises when these New Hampshire residents do their work from their homes in New Hampshire.
Beginning in March 2020, Massachusetts established that those who work out of state for Massachusetts-based companies would continue to be charged income tax in the state to “minimize sudden disruption for employers and employees during the COVID-19 state of emergency,” according to a Massachusetts government release. The regulation was intended to be temporary; however, subsequent changes removed the “temporary” language.