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State taxes and road warriors, part 2: proposal in Congress

In the first part of this two-part post, we talked about how states differ considerably on how they respond to so-called “road warriors.” Road warriors, in this context, are people who live in one state but work in another.

In this part of the post, we will discuss the proposed federal legislation that could create uniform standards for states to apply.

The proposed bill in Congress is called the Mobile Workforce State Income Tax Simplification Act.

One provision of the bill would establish the standard for the duration of employment in another state that would be required to bring income taxes into play. Under the proposal, that duration would be 30 days.

In practice, then, when a worker crosses the 30-day threshold in working in another state, that state’s income tax laws would apply. And this would include obligations for the employer as well in terms of income tax withholding.

To the worker, this type of arrangement might seem to hold out the possibility of double taxation. Under the proposed legislation, however, there would be a provision for a tax credit against the income tax liability that the worker may face in the state where he or she resides.

Such tax credits are commonly used under current practice. The bill that Congress is considering would not change this; it would merely make it the common standard for all states across the country.

Prospects for passage of the bill by both houses of Congress are uncertain. Last year, the House passed a similar bill but it did not come to a vote in the Senate.

Clearly, however, the issue of creating common standards for “road warriors” is firmly on the Congressional radar.

Source: USA Today, "'Road Warrior' state income tax laws vary widely," Elaine S. Povich (Stateline), Dec. 12, 2013

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