NY Taxes Out-of-State COVID-19 Health Care Volunteers

May 7, 2020 NY Taxes Out-of-State COVID-19 Health Care Volunteers

New York chose not to give any NY State Tax relief to the thousands of out-of-state health care workers that responded to the Empire State’s plea to them to “please come help us in New York right now. We need relief”.

Under NY tax law, if a worker is there for 14 days or more, that NY worker is subject to NY taxes.  As we all know, NY has one of the highest tax rates in the county.

Staying away from the politics and knee-jerk reactions of this decision, we will make a few interesting points here:

  • This illustrates the main theory behind multistate taxation and tax residency – you typically pay taxes where you are working because you are benefiting from the services that those taxes fund – public safety, transportation, etc.

  • These workers will get a “credit” on their resident state tax return (the state of their principal residence), so they will not be taxed twice on this income – they are just paying the net difference between the NY state tax rate and their home state tax rate.

  • They will need to file a Part-Year Resident NY tax return to report this income and their permanent resident state tax return may get a bit complex. They will probably need professional help preparing their taxes.

  • Out-of-State employers sending their employees to NY will need to secure Workers’ Compensation (WC) insurance.  NY has a very tough WC law – the fine is $2,000 for each ten-day period without WC insurance.

  • Most states have similar laws subjecting out-of-state workers to taxation after a certain number of days.

  • Professional athletes pay NY (and other state) taxes on the percentage of games they play in that state – so, Tom Brady (now a FL tax resident and FL has no state income tax) needs to pay NJ taxes on 12.5% of his salary, if Tampa Bay plays the NY Jets twice (the Jets play their “home” games in New Jersey – just think of all of the tax revenue that NY loses to NJ, as the Jets and Giants play their “home” games in NJ).

  • For the Army Corp of Engineers that built those NY hospitals – if they were a resident of NY before they joined the Army, their military pay is subject to NY taxes no matter where they are stationed.  If they were not NY residents prior to joining the Army, none of their military pay is subject to NY taxes no matter how many days they work in NY.

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