As previously reported, due to the COVID-19 pandemic, remote workforces currently dominate the landscape of most U.S. businesses. In fact, in many industries, remote workforces may be the new normal post-pandemic. Unfortunately, as workers become more mobile, the tax and human resources issues become more challenging for employers.
I was asked by Dan Feld, Principal Editor, Tax Journals, of Thomson Reuters, to author an article on this topic for the July 2022 Practical Tax Strategies Journal. With Dan’s approval, I have provided a link to the complete article, Remote Workforces: Tax Perils and Other Traps For Unwary Employers, for my blog readers.
The Taxpayer Advocate Service (“TAS”) is an independent body housed within the Internal Revenue Service (the “Service” or “IRS”). Its mission is to ensure taxpayers are treated fairly by the Service and that taxpayers know and understand their rights with respect to the federal tax system. Further, the TAS was created by Congress to help taxpayers resolve matters with the IRS that are not resolved through normal IRS procedures. Additionally, the TAS was established to address large-scale, systemic issues that impact groups of taxpayers.
The TAS is currently led by Ms. Erin M. Collins, who joined the TAS in March 2020. She serves as the National Taxpayer Advocate (“NTA”). The NTA submits two reports to Congress each year, namely an “Annual Report” in January and what is called an “Objectives Report” in June.
On June 22, 2022, the NTA submitted the TAS Fiscal Year 2023 Objectives Report to Congress. In addition to identifying the TAS’s objectives for the upcoming fiscal year, Ms. Collins sets out the good, the bad and the ugly relative to the Service’s performance during the year. As a report card, it does not appear Ms. Collins gave the IRS all A’s. She expressed critical comments centered primarily around three areas of customer service that include unprocessed paper-filed tax returns, delays in responding to taxpayer correspondence and failures in answering taxpayer telephone inquiries. Whether the criticism is warranted may be debatable.
Early in the pandemic, I reported on the widespread newly created remote workforces resulting from stay-at-home orders issued by the governors of most states. In many cases, neither the employer nor the workers were prepared to take this journey.
Fears were rampant among employers that workplace productivity would diminish, quality of work would be impacted, technology would not support remote workers, culture would be compromised, employee recruiting and retention would be harmed, and customer goodwill would be tarnished. On top of that, many employers worried that employee fatigue (mental and physical) would accompany the new workforce model.
Now that we are over two years into the pandemic, employers and employees alike are surprised to find that their fears, for the most part, were misplaced. In most cases, it is reported that the remote workforce model is working quite well.
- Employees generally like the remote workforce model;
- In a large number of cases, employees desire to remain remote post-pandemic;
- The lack of commuting to and from work reduces employee disruption, stress and household expenses (commuting costs, daycare, meals and clothes), and allows more time for family and leisure activities;
- Workplace politics are diminished;
- It creates flexibility as to where employees may live, resulting in housing costs reductions in some cases; and
- Employee absenteeism is diminished.
During the COVID-19 pandemic, the federal government enacted three major pieces of legislation to provide financial relief to individuals and families. The American Recovery Plan Act (“ARPA”), the most recent legislation, provides the third round of Economic Impact Payments (“EIPs”), also referred to as stimulus payments (and “recovery rebates” in the acts), to millions of Americans.
It is not unreasonable to anticipate that there will be a federal tax policy transformation following a change in the political control of the White House, the U.S. Senate and the U.S. House of Representatives. What may be unreasonable, however, is making knee-jerk tax planning decisions in anticipation of possible modifications to the Internal Revenue Code (the "Code"). Reactionary planning, unless it is well thought out and is based upon sound business judgment, could end up being disastrous. During the present times, tax advisors and their clients need to be cautious in their tax planning and any related decision-making.
Looking through a lens solely focused on federal taxation, it seems that commentators, tax advisors and taxpayers alike are all worried about the future. Possible tax policy changes on the horizon that are being bantered about include:
On November 2, 2015, the Bipartisan Budget Act (“Act”) was signed into law by President Barack Obama. One of the many provisions of the Act significantly impacted: (i) the manner in which entities taxed as partnerships are audited by the Internal Revenue Service (“IRS”); and (ii) who is required to pay the tax resulting from any corresponding audit adjustments. The new rules sprung into life for tax years beginning after December 31, 2017.
In the wake of the coronavirus pandemic, companies in wide-ranging industries across the country have unprecedented numbers of employees working from remote locations. In a prior post, we discussed numerous issues that may arise from this new normal of teleworking, including tax, labor and employment, liability, and business registration implications.
In this post, we drill down a bit further with respect to employers’ state tax reporting and payment obligations that may result from having employees working remotely in states other than where the employers maintain physical offices. This is especially relevant in metropolitan areas that straddle multiple states, like here in Portland, Oregon.
When we thought times were bad enough with the COVID-19 pandemic and widespread social unrest in our country, the West Coast, including the Pacific Northwest, was struck with unprecedented wildfires and massive windstorms, taking lives, destroying property and rendering the air quality throughout the region unhealthy. On September 16 and 17, the Internal Revenue Service announced good news for many taxpayers residing in Oregon.
In News Release OR-2020-23 and News Release IR-2020-215, the IRS announced that, due to the wildfires and windstorms striking Oregon, the deadline for certain Oregonians to file returns and make tax payments will be extended to January 15, 2021.
Earlier this year, the Idaho Supreme Court, in Noell Industries, Inc. v. Idaho State Tax Comm’n, --- P.3d ---- (2020), ruled that gain from the sale of membership interests in a limited liability company that had business operations in Idaho by a taxpayer domiciled outside of Idaho was not business income. As a result, the gain was not taxable in Idaho.
The court, in a 3-2 decision, upheld the district court’s reversal of the Idaho Tax Commission’s determination to tax the income. The sharks were circling the taxpayer, ready to attack, but the majority of the justices on the Idaho Supreme Court intervened, saving the taxpayer from a savage death (or at least a boatload of taxes).
As most people are aware, the 2019 income tax filing and payment deadlines for all taxpayers who file and pay their federal income taxes on April 15, 2020, were automatically extended until July 15, 2020. This relief is automatic and generally applies to all individual, trust and corporation tax returns. Additionally, this relief extends to estimated tax payments for tax year 2020 that were due on April 15, 2020.
People First Initiative
Additionally, the People First Initiative offered taxpayers who owed taxes some further relief. IRS Commissioner Chuck Rettig stated relative to the People First Initiative:
Larry J. Brant
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.