Nothing is certain but remote work and taxes
Welcome back to our Workplace newsletter. Today: As employees demand remote work, flee coastal cities and adopt the digital nomad lifestyle, taxes become a lot more complicated than those #vanlife hammock selfies make it look. Protocol talked to experts to find out what employers and employees need to know. Plus, entry-level jobs are the missing piece to solving the cybersecurity talent shortage.
Digital nomads pay taxes too
Roughly 55 million Americans can currently work remotely on a full-time basis, according to a new McKinsey study. That means happier pets, overwatered houseplants and some pretty complicated tax implications for both employees and employers.
One way to solve this problem is by offering remote workers contract jobs. But the tech job market is still tight, especially for companies desperate for engineers, and talented workers expect full-time remote work, with benefits. Plus, contract work invites all kinds of additional tax issues for both companies and workers.
Tax time is still a good nine months away, but The Great Resignation combined with industry layoffs means a lot of folks are considering their next job right now. And according to tax experts, that is exactly the time to think about how and where you’ll pay taxes.
The dust is settling on the pandemic workplace chaos, so both companies and workers need to know and follow the law unless they want to commit tax fraud.
- According to a Harris Poll, over half of employees who started working remotely during the pandemic didn’t fully understand the tax implications.
- And for good reason: The laws differ from state to state; they change; and if you ask your HR person to help you fill out your tax forms, they’re likely to say that it’s out of their scope of responsibility and could make the form invalid.
- “The general rule of thumb is that the employee should pay taxes to the state in which they perform the work,” says Kevin Fritz, employment counsel at benefits software company Gusto. “But some states have different laws about this, and the employee could be double-taxed [home state and work state].”
The COVID loopholes are closing.
- In 2020, some states waived restrictions so people could travel outside of their work state to care for family or protect themselves.
- “I think the notion of the ‘Wild West’ of remote work has faded,” says David Livitt, global mobility services leader at Mazars, an international audit, tax and advisory firm. “I’d argue that it’s time for a review of the overall approach.”
- Fritz from Gusto agrees. “A lot of the COVID flexibility has ended now — and in most cases, if you relocated during COVID and are still in a new state, you’re more than likely required to pay taxes to the new state now.”
How long can you stay in one place without paying taxes?
- “I’m certain that if you lined up 10 people and asked them this question, you’d get 10 different answers,” says Livitt.
- Some people will tell you the answer is 183 days, but Livitt says this is a myth.
- “It all sounds so idyllic … I fancy working in Canada for a month. Or I have a family visit to India for two weeks, maybe I can attach another 90 days there to work remotely for my U.S. employer?” Livitt’s advice is to “check the details.”
What are the biggest risks?
- If companies don’t comply with local tax rules, they could face penalties and fines. “And maybe worse consequences,” says Livitt.
- “Many individuals think that working in a different country or state for even a short period of time isn’t taxable — but it often is.”
“We’ve all seen the rise of “digital nomads” — and who wouldn’t want to work on or near a sunny beach for a year? However, there might be hidden issues with respect to taxes, social security and data security.”
It’s time to rethink your talent pipeline
Nicholas McLaren was starting to doubt he had a future in cybersecurity.
After receiving his bachelor’s degree in information security from Georgia State University in the fall of 2019, McLaren was eager to land his first job. He had a passion for cybersecurity, and also wanted to show the opportunities that were available in the field to younger members of the Black community.
But accessing the opportunities himself was proving to be a challenge. And it didn’t make sense. McLaren had heard so much about the cybersecurity talent shortage, and also about the need to increase the diversity and representation in the industry. But after applying to one cybersecurity job after another and getting no offers, “I kind of felt like I’d gotten played,” he said.
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Job postings by the numbers
Overall tech employment is still in growth mode even as tech job postings stumbled last month, according to an analysis of Friday’s jobs report from the U.S. Bureau of Labor Statistics.
- 505,663 tech jobs were posted last month, a 62% increase from June 2021, the Computing Technology Industry Association found.
- Yet from May to June, the number of job postings started to dwindle. Job posts were down 18% for software developers and engineers; 28% for cybersecurity specialists, engineers and analysts; and 12% for network engineers and architects.
- Capital One (13,774), Amazon (9,204) and Deloitte (7,368) posted more tech job ads in June than other U.S. employers.
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