Syracuse, NY – To slow the spread of the deadly coronavirus, Governor Andrew Cuomo issued a stay home order last March that prevented many people from working at their place of business.
Now, some of these workers could face high government income tax burdens because they worked from home.
Employees at companies in the Start-Up New York business development program have been warned that they may have lost a promised state income tax exemption for working from home.
Empire State Development, the state’s business development arm, emailed 309 companies on February 17 as part of the program warning them that employees not working exclusively at employer-approved company locations in 2020 would be in a Start-Up Zone in New York that have worked are not eligible for the exemptions.
“Under NYS Taxes Act, during the START-UP Income Exclusion for New York Income Tax, an employee must perform work that is only performed in an approved corporate location in a tax-exempt NYS area for the taxable year,” ESD said in the email . “Due to the COVID-19 precautionary measures, it is possible that otherwise eligible employees did not meet this requirement for the 2020 tax year.”
The New York Business Incubator Association said over 200 startups in their affiliates could face a “hiccup in the law”.
“By following the Start-Up Act in New York, we would be violating New York State’s emergency directives to create social distance during the Covid-19 pandemic,” the association said.
Marc Alessi, the association’s executive director, said the organization is in talks with state lawmakers to try to change the rules of the program so that workers unable to work in their offices due to the pandemic restrictions can receive the tax exemption.
“Even people who are not part of the program think it’s unfair to the companies that followed the rules of the program and then the rules of the Covid restrictions,” he said.
Alessi said taxes were not withheld from workers’ paychecks. If the rules are not changed, many could face unexpected state tax charges of $ 4,000 to $ 5,000 when they file their 2020 tax returns, he said.
The ESD email advises companies on the program that the W-2s they issue to employees should demonstrate that the income of otherwise eligible employees working remotely should be considered as taxable income.
Cuomo launched the Start-Up NY program in 2014 to attract new and expanding businesses to the state. The companies and any new employees they hire are eligible for up to 10 years of tax exemption if the companies are affiliated with a state or local college and are located on the college campus or near designated locations.
As of 2019, 2,456 employees were in the program.
Kristin Devoe, a spokeswoman for Empire State Development, said the rule that workers in the program must only work in their employers’ offices is part of tax law and can only be changed by lawmakers. She said ESD officials hope lawmakers will amend the law as part of the upcoming state budget process.
“We are aware of the unique circumstances caused by the pandemic and the state is proposing a solution that lawmakers will hopefully include in the approved budget,” she said.
Rick Moriarty covers business news and consumer issues. Do you have a tip, a comment or a story idea? Contact him at any time: E-Mail | Twitter | Facebook | 315-470-3148