5 ms·

My understanding is that this has big tax implications (since presumably said low cost of living areas are outside of California). I would love to understand be

by lhorie 6y ago

My understanding is that this has big tax implications (since presumably said low cost of living areas are outside of California). I would love to understand better what sorts of complications WFH bring to the table for those cases (and how they can be mitigated).

ghaff 6y ago
The company needs to do payroll in a different state and you, as an individual, now pay taxes in your state of residence which isn't where company HQ is. From a tax perspective it's mostly no different than if they had a small office in that state. For big companies, in particular, it's not that big a deal as they're probably using a payroll service like ADP anyway. There may be some paperwork--and certainly more so if other countries are involved.
- SkyPuncher 6y ago
  > The company needs to do payroll in a different state and you, as an individual, now pay taxes in your state of residence which isn't where company HQ is. This is not always true. I'm remote. I pay my state and CA taxes for my CA based company even though I have never set foot in CA for this job.
  - tylermac1 6y ago
    Is that something specific to CA? I've worked remotely for 5 years and have only ever paid state income tax in my home state, not wherever my employer is.
  - lhorie 6y ago
    I've also heard of stories of people getting in trouble for "moving residence" to Incline Village (Nevada) and doing taxes in Nevada while working in CA.
  - ghaff 6y ago
    I confess I don't know what the laws are then. Presumably you don't pay both your state and CA taxes on your whole salary? I confess I've never been in the position of being officially completely remote. I certainly don't pay taxes to the state where my company's HQ is but then I'm officially in an office in my state of residence. (And maybe the existence of that office would make a difference even if I weren't actually assigned there.)
  - jedberg 6y ago
    You may want to talk to a CPA or tax specialist. You’re most likely violating your state law as well as overpaying on your taxes.
  - volandovengo 6y ago
    I've unfortunately become a payroll tax-witholding specialist. You're required to withold taxes in the state that work is performed. If you're working from home, that's your work location. You should get refunded for your CA taxes at the end of the year if they are being withheld.
  - fmpwizard 6y ago
    Like others have said, check with an accountant, I have worked remotely for the past 11 years in NC, for companies in GA, CT and NY, but because I'm 100% remote, I only have to pay NC taxes. None of them ever had an office in NC
- cdjk 6y ago
  Unemployment insurance, family/medical leave, workers comp, and health insurance are all different by state. That can be a lot of overhead for the first employee in a new state, but then the second is trivial.
- blahblahblogger 6y ago
  Wow so if I work for a company with an office in Chicago, but I work in their SF office - I could potentially relocate without a salary adjustment?
  - ghaff 6y ago
    I was just talking about taxes. Whether the company adjusts salaries based on your home address is orthogonal.
- lhorie 6y ago
  I had two different scenarios in mind: one happened to an acquaintance, where they negotiated a pay cut (because presumably the company doesn't want to pay Bay Area salary to a remote worker in a location in an area w/ lower salary base), and there was the question of taxes involving part of the year in one state and part in another (plus the math for RSUs and options, of which the person had vested both in both states). The other scenario involves visa workers. The I-140 is predicated on not being able to find local candidates that match a criteria. More broadly, the H1-B visa grant pertains to foreigners being able to work in the US at all in the first place. I'd imagine that if you had everything setup to be remote from the beginning it'd probably be fine to keep things humming along, but I imagine that switching surely must pose some sort of logistic challenge?
- smueller1234 6y ago
  For big companies, this is an international problem! And then tax issues aren't just the employees' income taxes but the company's tax regime.
  - ghaff 6y ago
    mitchellh discusses some of the international complexities here: https://news.ycombinator.com/item?id=17022563 https://news.ycombinator.com/item?id=17022563 It's definitely way more complicated than adding an employee in a new state.
    - smueller1234 6y ago
      Absolutely! In that long comment, mitchellh briefly talks about the impact of employing folks in different states on potential corporate tax. Now imagine you ran one of the big billion+ USD revenue tech companies, and you're not talking about different states in the same country but a distributed workforce in many countries and the political pressures on taxation of e-commerce or similar business models involving intangible goods. One of the key arguments in many a tech company's tax/legal toolbox (usually for arguing they should pay taxes on one jurisdiction instead of another) is in which countries their engineering efforts reside and to what extent. It's really no wonder that employment legal & finance wins out on totally flexible work arrangements in that situation, for better or worse. Politicians aren't taking any hostages in this context, see eg. France. To provide an example from sufficient years back: I had to represent the stance of a past employer on compliance with Russian privacy laws to Roskomnadzor[1] in their HQ in Moscow. Through a carefully planted trick they tried to get us to commit to establish just the right kind of representation to be able to tax our revenue from Russian customers. In many countries, the narrative would've been "you have engineers here, you therefore build your products here, you should pay income tax here". Curiously, there isn't really obvious right or wrong in all this since the goods are intangible. [1] https://www.google.com/search?q=roskomnadzor https://www.google.com/search?q=roskomnadzor (Disclaimer: experience entirely from prior to my current employment at Google, I don't speak for Google in any way and have no insight into these matters at Google.)
- jedberg 6y ago
  You’re vastly underestimating the work of “setting up an office” in a new state. Every state has a bunch of paperwork, like setting up your company as a foreign corporation in that state. Then there is state licensing. Also every state has its own worker’s compensation requirements and some have other requirements too. Your payroll provider generally tells you that you’re on your own for all that stuff. For every additional state there is a ton of overhead. I’ve had employees in California, Washington, and New York. It took two years to unwind Washington after the one employee there left, and it took a year and 20 hours of lawyer time to unwind New York, who was trying to charge us $5,000 as a penalty for missing paperwork we didn’t think we had to file (we ended up being right after paying the lawyer).
  - lhorie 6y ago
    Sounds like a startup opportunity!
    - jedberg 6y ago
      Honestly I’m surprised Gusto doesn’t handle more of the work of setting up in a new state. Seems like it would be in their wheelhouse.
      - ghaff 6y ago
        I admit to having been naive on the issue. I know that bureaucracies are involved but it still seems as if at least the 90% case would be pretty cookie-cutter/repeatable even if there are a lot of steps and potential gotchas.
  - jjeaff 6y ago
    Payroll companies handle all the workers comp and payroll related duties for all different states and they do it for near nothing. The only thing you are on your own for is tax filings and registration as a foreign entity. And that is only in some cases in some states. In most states, having a few remote employees is not enough to even trigger a filing requirement. In CA, which is probably one of the most draconian, we had to register as a foreign entity and then we have to file corporate taxes there and allocate taxes proportionally according to percentage of revenue that comes from CA, I believe. And actually, they want your corporate income tax even if you don't have employees there, just because you sell to Californians. But they have had a hard time collecting for those that have no employees or other presence in the state.

by lhorie 6y ago

ghaff 6y ago

The company needs to do payroll in a different state and you, as an individual, now pay taxes in your state of residence which isn't where company HQ is. From a tax perspective it's mostly no different than if they had a small office in that state. For big companies, in particular, it's not that big a deal as they're probably using a payroll service like ADP anyway. There may be some paperwork--and certainly more so if other countries are involved.

SkyPuncher 6y ago
> The company needs to do payroll in a different state and you, as an individual, now pay taxes in your state of residence which isn't where company HQ is. This is not always true. I'm remote. I pay my state and CA taxes for my CA based company even though I have never set foot in CA for this job.
- tylermac1 6y ago
  Is that something specific to CA? I've worked remotely for 5 years and have only ever paid state income tax in my home state, not wherever my employer is.
- lhorie 6y ago
  I've also heard of stories of people getting in trouble for "moving residence" to Incline Village (Nevada) and doing taxes in Nevada while working in CA.
- ghaff 6y ago
  I confess I don't know what the laws are then. Presumably you don't pay both your state and CA taxes on your whole salary? I confess I've never been in the position of being officially completely remote. I certainly don't pay taxes to the state where my company's HQ is but then I'm officially in an office in my state of residence. (And maybe the existence of that office would make a difference even if I weren't actually assigned there.)
- jedberg 6y ago
  You may want to talk to a CPA or tax specialist. You’re most likely violating your state law as well as overpaying on your taxes.
- volandovengo 6y ago
  I've unfortunately become a payroll tax-witholding specialist. You're required to withold taxes in the state that work is performed. If you're working from home, that's your work location. You should get refunded for your CA taxes at the end of the year if they are being withheld.
- fmpwizard 6y ago
  Like others have said, check with an accountant, I have worked remotely for the past 11 years in NC, for companies in GA, CT and NY, but because I'm 100% remote, I only have to pay NC taxes. None of them ever had an office in NC
cdjk 6y ago
Unemployment insurance, family/medical leave, workers comp, and health insurance are all different by state. That can be a lot of overhead for the first employee in a new state, but then the second is trivial.
blahblahblogger 6y ago
Wow so if I work for a company with an office in Chicago, but I work in their SF office - I could potentially relocate without a salary adjustment?
- ghaff 6y ago
  I was just talking about taxes. Whether the company adjusts salaries based on your home address is orthogonal.
lhorie 6y ago
I had two different scenarios in mind: one happened to an acquaintance, where they negotiated a pay cut (because presumably the company doesn't want to pay Bay Area salary to a remote worker in a location in an area w/ lower salary base), and there was the question of taxes involving part of the year in one state and part in another (plus the math for RSUs and options, of which the person had vested both in both states). The other scenario involves visa workers. The I-140 is predicated on not being able to find local candidates that match a criteria. More broadly, the H1-B visa grant pertains to foreigners being able to work in the US at all in the first place. I'd imagine that if you had everything setup to be remote from the beginning it'd probably be fine to keep things humming along, but I imagine that switching surely must pose some sort of logistic challenge?
smueller1234 6y ago
For big companies, this is an international problem! And then tax issues aren't just the employees' income taxes but the company's tax regime.
- ghaff 6y ago
  mitchellh discusses some of the international complexities here: https://news.ycombinator.com/item?id=17022563 https://news.ycombinator.com/item?id=17022563 It's definitely way more complicated than adding an employee in a new state.
  - smueller1234 6y ago
    Absolutely! In that long comment, mitchellh briefly talks about the impact of employing folks in different states on potential corporate tax. Now imagine you ran one of the big billion+ USD revenue tech companies, and you're not talking about different states in the same country but a distributed workforce in many countries and the political pressures on taxation of e-commerce or similar business models involving intangible goods. One of the key arguments in many a tech company's tax/legal toolbox (usually for arguing they should pay taxes on one jurisdiction instead of another) is in which countries their engineering efforts reside and to what extent. It's really no wonder that employment legal & finance wins out on totally flexible work arrangements in that situation, for better or worse. Politicians aren't taking any hostages in this context, see eg. France. To provide an example from sufficient years back: I had to represent the stance of a past employer on compliance with Russian privacy laws to Roskomnadzor[1] in their HQ in Moscow. Through a carefully planted trick they tried to get us to commit to establish just the right kind of representation to be able to tax our revenue from Russian customers. In many countries, the narrative would've been "you have engineers here, you therefore build your products here, you should pay income tax here". Curiously, there isn't really obvious right or wrong in all this since the goods are intangible. [1] https://www.google.com/search?q=roskomnadzor https://www.google.com/search?q=roskomnadzor (Disclaimer: experience entirely from prior to my current employment at Google, I don't speak for Google in any way and have no insight into these matters at Google.)
jedberg 6y ago
You’re vastly underestimating the work of “setting up an office” in a new state. Every state has a bunch of paperwork, like setting up your company as a foreign corporation in that state. Then there is state licensing. Also every state has its own worker’s compensation requirements and some have other requirements too. Your payroll provider generally tells you that you’re on your own for all that stuff. For every additional state there is a ton of overhead. I’ve had employees in California, Washington, and New York. It took two years to unwind Washington after the one employee there left, and it took a year and 20 hours of lawyer time to unwind New York, who was trying to charge us $5,000 as a penalty for missing paperwork we didn’t think we had to file (we ended up being right after paying the lawyer).
- lhorie 6y ago
  Sounds like a startup opportunity!
  - jedberg 6y ago
    Honestly I’m surprised Gusto doesn’t handle more of the work of setting up in a new state. Seems like it would be in their wheelhouse.
    - ghaff 6y ago
      I admit to having been naive on the issue. I know that bureaucracies are involved but it still seems as if at least the 90% case would be pretty cookie-cutter/repeatable even if there are a lot of steps and potential gotchas.
- jjeaff 6y ago
  Payroll companies handle all the workers comp and payroll related duties for all different states and they do it for near nothing. The only thing you are on your own for is tax filings and registration as a foreign entity. And that is only in some cases in some states. In most states, having a few remote employees is not enough to even trigger a filing requirement. In CA, which is probably one of the most draconian, we had to register as a foreign entity and then we have to file corporate taxes there and allocate taxes proportionally according to percentage of revenue that comes from CA, I believe. And actually, they want your corporate income tax even if you don't have employees there, just because you sell to Californians. But they have had a hard time collecting for those that have no employees or other presence in the state.