> 66 percent of the 1,500 full-time employees surveyed in the U.S. and U.S. said they did not tell human resources about all the dates they worked outside of their state or country, and 94 percent said they believe they should be able to work wherever they want if their work gets done.
This is what it boils down to. If you want a remote workforce, you're not going to be able to keep them confined to some box that you decide is acceptable.
I suspect what it really boils down to is laws. Taxation works different outside of US borders, and there may be export restrictions to consider. It's a valid point that you won't be able to nail down a remote workforce that travels within the country's borders, but leaving the country may be a problem.
I am not a lawyer so perhaps my hypothesis is wrong.
In the US we generally tax based on where you live, not where you temporarily reside. Federally if you're a US citizen you're welcome to live anywhere you'd like but the IRS will still require their payment.
States are usually based around where you are more than half the year. But that's likely simple to show. If you're actually not there they don't have much of a complaint.
This gets really messy for consulting companies, where employees "work" at the client location 3-4 days a week, 2-3 weeks a month.
We had to track and report what states we worked in and what days, down to the billing hours, and then in some cases had to file tax returns in some of those states.
Also, all of the partners were required to file taxes in every state where the company earned income, which worked out to something like 46 states and 5 countries.
Read up on the accounting required for baseball players. It's absolutely insane and sometimes comes down to "were they on the roster" or "in the stadium" or "on the lineup" and so forth.
Income is taxed where it’s generated in America, not based on residency (at the state level, the feds always get their pound of flesh). Many people don’t follow this rule but it’s smoothed over by reciprocal tax agreements between states. Companies are usually good about tracking this stuff and paying taxes appropriately, employees are usually not but the company pays the taxes correctly and so the employee lucks into doing their taxes correctly. Consultants will often find themselves confused after receiving a mean letter the first time they fuck this up because most people think as you do.
Income is also taxed if it's generated outside America as long as you're an American citizen. Some people who emigrated to Europe as a child got quite a nasty tax bill for decades of untaxed income when the USA found out that they're still American citizens, for example.
Many countries have tax law to deal with this type of American bullshit but it's still something to be aware of.
Does any state do that? I'd think it could cause a civil war damn fast.
The nexus is "where the work is performed" or "where the employee resides" and usually states have agreements with the neighboring states so it balances out.
In the US we generally tax based on where you live, not where you temporarily reside.
Nope, sorry, completely wrong.
You pay taxes to the states proportionately to how much time you spent in the state for the year. Many states don't even have a "floor" for how much time an employee works in a state before they're required to pay income and payroll taxes to that state, so in some states even one day working in that state triggers tax.
Consulting firms track employees time spent in each state down to the hour so they can properly pay payroll taxes. Many consulting firms will even pay for tax return prep for employees required to work in other states long enough to trigger tax compliance.
It's the employee's responsibility to maintain a current W-4 to indicate their tax withholding, unemployment insurance obligations, and local liabilities. Employers who try to police this more than requiring employees to maintain up to date W-4 are just opening themselves up to liability they otherwise wouldn't need to suffer.
Requiring an updated W-4 does not subject an employer to an additional liability.
Very importantly, the employer is already subject to additional liability by the very fact of the employee working in another state/jurisdiction. It's irrelevant from the perspective of the employer's legal liabilities whether the employee goes through the formality of updating their W-4.
But note that failure to update a W-4 after moving to another state or country is generally considered grounds for for-cause termination.
The problem isn't the company, it's typically the state/country.
It's a compliance problem for the company, it's not about controlling their employees. From the employee point of view, it may put you on the wrong side of both visa and tax laws wherever you are sitting.
For countries they have visas to go on, but moving between states or within the eu zone, how would they even know? If I have a po box or perhaps even a street address in WA or TX (no state income tax) but live in an airbnb somewhere in CA, how can the state figure it out? The employer probably can't either since you could run their vpn over your vpn.
I mean, taxes are a real thing and you have to pay them based on where you (the employee) live and do work. In the US for state income tax, it's a confusing mix of both lived location and worked location in various amounts by governments with a "claim" and with plenty of exceptions to go around. Consulting companies have had to deal with it forever (and states have "handled" forever), because you live in Miami, doing work for a company based in LA, and you travel to your client in NYC for 3 days a week for the whole year (60% of your income "generated" there). This is now a complicated Florida, New York, California scenario.
So the choice isn't Big Brother companies who want to know where you are at all times and respectful companies who allow you to get your work done how you want. It's between companies who are following the applicable tax laws or those who are not. A company that is structurally opting to not follow laws seems untenable. A company is a legal construct in many ways. Whether or not the employee can commit something like tax fraud is perhaps a less interesting question, because, yeah, you can probably cheat on your taxes.
That makes sense, but in the consulting case the employee has a motive to file expenses so the employer know. In this case it seems unreasonable for the employer to be heavily fined when they have no real way to determine their employees whereabouts. And because it would likely take an audit to catch the employee, when it does eventually happen it will be a larger hit to the business.
The error in your thinking is that many consultancies are aware of their legal nexus, and actively protect it, so ignorance is not a valid defense for any sensible company.
Talk to people who work for a big consulting firm, they've been taking "tax holidays" for the last 70+ years to ensure they don't spend more than 50% of their time away from their home base.
These companies are no fools; they wouldn't eat productivity and billable hours if they felt the state wouldn't care.
I get that the company wants to know and protect itself. I'm just not sure how they can after reading this article. Short of requiring all employees to check in physically periodically.
That's precisely the point; Many workers are not applying for work visas, which makes them outlaws and subject to deportation. Some countries have digital nomad visas with 0% tax rates now, but not most.
> If I have a po box or perhaps even a street address in WA or TX (no state income tax) but live in an airbnb somewhere in CA, how can the state figure it out?
Hypothetically, CA is financially incentivized to find that out, how is the the question.
But, if they do then they are going to
1) audit
2) if you don't respond to audit and tax -- arrest
3) at the same time suit the employer, especially if they have any operations in CA for not declaring your work properly.
What you are basically saying is, as an employee, "is it possible to commit fraud in this way". The answer is obviously yes. It's a completely separate question whether or not tax law should be the way it is.
I don't think businesses care, other than issues with taxation if people start working from another country. It's the fault of tax services and governments.
Unless you're working for a defense contractor, in which case they aren't letting you WFH in the first place, foreign governments do not give a shit about your 'insider knowledge'
OK, let me rephrase: as a senior manager within the broadly-defined technology security function of a large US company (that is not a defense contractor), I care, as does our board of directors.
I don't think it's that. Supposing an employee had access to approve and pay invoices for a US company, and then moved to a country that had no extradition treaty with the US.
I wouldn't be surprised if there were worries about someone working from a sanctioned country as well. Would paying their wages break sanctions?
This is what it boils down to. If you want a remote workforce, you're not going to be able to keep them confined to some box that you decide is acceptable.