Working from (childhood) home: The new stealth employee

Today, we highlight another member of the Consulting Team here at Plus Relocation, Kevin Danielson. Kevin is an integral member who helps our clients develop and maintain world-class talent mobility programs. His focus today is on "the new stealth employee."  

Take it away Kevin:

Moving back in with the parents after a period of independence is nothing new. "Boomeranging," a decades-old trend primarily fueled by those returning to the nest seeking financial stability, just found another driving force: COVID-19. And these young professionals aren’t just moving in with their parents — they’re setting up offices.

The New York Times profiled several people who are adjusting to their new office space in their childhood home for a number of reasons, including escaping a COVID "hot spot," being closer to family during this time and daycare support.

Among them was Carly, a Philadelphia woman who, while on vacation at her parents’ home in Florida with her 3-year-old daughter, decided to stay when the pandemic escalated. Her makeshift office includes a plastic folding table and chair, as well as a whiteboard that will be arriving by mail. 

According to this New York Times article, “Across the United States, millennials and Gen-Z professionals are escaping dense cities by moving back into their parents’ homes. Some feel safer outside of crowded settings or want to be close to their parents to help care for them if they fall ill.” 

For some who are setting up offices at their parents’ homes, as in the case of Carly, that might mean they are now working from a different state. Without the company’s knowledge of the employee working across state lines, they have now become a “stealth” employee. Because income taxes are due to the state in which the work is performed regardless of the location of the company, it’s important for employers to get a handle on who their potential stealth employees may be, as they create certain payroll challenges.

According to an article published by GTN, due to the greater chance of employees working remotely from other states during this pandemic, employers need to be asking themselves questions such as:

• Do you know where your people are working?
• Does your payroll system have the capacity to handle multi-state withholding requirements?
• Where should you be paying unemployment insurance for out-of-state, work-from-home employees?
• Do you need to register employment status in a new state?

These questions are not only relevant during this pandemic but should be addressed by all companies that have remote employees.

Though these new stealth employees could create a tax nexus (a connection between a taxing jurisdiction and an entity) for their companies, whether or not states choose to enforce this nexus remains to be seen. Some states, such as Massachusetts, Minnesota and Mississippi, said the presence of an employee working in the state because of the pandemic will not create a nexus.

In contrast, the New York governor said those working in his state temporarily during the pandemic will be liable for New York income taxes. Wipflihas been keeping track of state and local taxing authority responses to the pandemic in all 50 states, which can be found here.

For those like Carly who are working from their parents’ homes across state lines, this new situation will be temporary. But after the pandemic, more employees could be requesting remote working than ever before. Employers who allow remote working need to be prepared and anticipate payroll challenges this trend could create.