American Payroll Association (APA) Basic Guide to Payroll, 2013 Edition
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The New York State Department of Taxation and Finance released a guidance memo July 5 to explain the state's policy on the withholding of wages paid to nonresident employees whose primary work locations are outside of the state.
Employers are not required to withhold taxes on wages for nonresident employees who are expected to work in the state for 14 days or less, according to the memo. Under the so-called 14-day rule, employees must be assigned to a primary work location outside of New York, the employer must reasonably expect the employee to work 14 days or less in the state, and the employee must not work in the state for more than 14 days.
The 14-day rule does not apply to certain types of compensation, including the compensation paid to athletes and entertainers, deferred compensation, and compensation for speeches and presentations, according to the memo. In addition, the rule does not apply to “compensation paid to nonresident traveling salespersons or other employees when the compensation depends entirely on the volume of business transacted by them,” according to the memo.
Allocation of wages. The memo also clarifies the allocation of wages. “If a nonresident employee performs services partly in and partly outside the state, the amount of wages allocable to New York state is that part of the total compensation that the number of days worked in New York state bears to the total number of days worked both in and out of New York state, exclusive of nonworking days,” according to the memo.
“However, to figure the earnings of traveling salespersons or other employees whose compensation depends entirely on the volume of business transacted by them, the amount allocable to New York state is that part of the compensation received that the volume of business transacted by them in New York state bears to the total volume of business transacted by them both in and out of New York state.”
Nonresident employees, according to the memo, must file state personal income tax returns if they have New York state income and their adjusted gross income is more than the state's standard deduction. “The policy discussed in this memorandum does not relieve a nonresident who works 14 days or fewer in New York state from the requirement to file a New York state personal income tax return and to report his or her New York wages.” (New York State Department of Taxation and Finance, Technical Memorandum TSB-M-12(5)I Income Tax July 5, 2012; http://www.tax.ny.gov/pdf/memos/income/m12_5i.pdf.)
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