AICPA Advocates for CPAs with Mobile Workforce Legislation

Tax forms Do you or your employees travel around the country, working in different states and jurisdictions? As I travel around the United States, I hear more and more management accountants lamenting the difficulties associated with interstate operations and the significant regulatory burden with regard to compliance with non-resident state income tax withholding laws.

Currently, there are 41 states that impose a personal income tax on wages and there are many different tax requirements regarding the withholding of income tax of non-residents among those 41 states. While some states offer de minimis thresholds or exemptions before taxes must be withheld and paid, others require only a work appearance in the state before imposing personal income taxes on the employee and withholding requirements on the employer—even for just one day.

The AICPA takes the position that businesses should not be expected to expend their resources on the administrative burden that multiple, inconsistent state tax laws impose. Today’s workforces are mobile and there is need for uniform rules and regulations. Many companies and their employees may be in noncompliance with state tax law and not even know it.

I wanted to share with you some exciting advocacy work the AICPA is doing to support the establishment of a national standard for state income taxes on nonresident employees. The AICPA-backed Mobile Workforce State Income Tax Simplification Act of 2011, S. 3485, was introduced in the Senate this summer. (A companion bill, H.R. 1864, passed in the U.S. House of Representatives in May of this year.) The AICPA is a leading member of the Mobile Workforce Coalition, which is working with Senators to pass the legislation.

Both bills would establish a uniform requirement that nonresidents would have to work in a state for more than thirty days before becoming subject to out-of-state income taxes. Having a uniform national standard would eliminate the burden of having to research multiple state laws when employees work on an interstate basis for short periods. The change would make state income tax withholding easier to administer for traveling employees and their employers and would help ensure that states and local jurisdictions get the taxes they are owed.

Do you have any experiences with this issue that you’d like to share? I look forward to reading your comments below.

Arleen Thomas, CPA, CGMA, Senior Vice President - Management Accounting, American Institute of CPAs.

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