Remote Work Yields Savings, But Watch for Tax and Jurisdiction Issues

Avoiding those conversations altogether may not be an option. Roughly four million Americans were already working from home well before COVID-19 forced businesses to close their office doors, and many more could be unwilling to return to a cubicle once the public health crisis has subsided. Making a conscious choice to lean into remote working could not only help organizations mitigate employee turnover, but also grant hiring managers access to a wider talent pool no longer constrained by geography — not to mention the savings on overhead costs like office space.

Tax Considerations

That doesn't mean it will be easy. For starters, the ability to hire remote employees based in other states triggers a slew of challenging tax questions that will likely seem familiar to law firms or companies that are either located near state borders, have experience expanding into new states, or have employees who travel to job sites in other states. The "physical presence" rule dictates that employees pay taxes to the state in which their work is performed. For instance, if a company's head office is in State A but it has remote employee working from home in State B, it would be required to withhold unemployment and state taxes in State B, even if the business doesn't maintain a physical branch office there.