Effective for tax years beginning on or after January 1, 2023, New Jersey adopted the convenience of the employer test for nonresident employees who are residents of states that impose the test, (i.e, New York) [A.B. 4694, L. 2023].
The New Jersey law applies to nonresident employees who work outside of New Jersey for a New Jersey employer. It applies only if the New Jersey employer does not require the employee to work outside of New Jersey and the employee is a resident of a state that taxes income based on the remote location, where that location is chosen for the convenience of the employee (not for the necessity of the employer).
Basically, the issue becomes whether the work done outside of New Jersey is done for the employer's necessity (or requirement) or for the employee's convenience (because they want to work from home for flexibility).
Other States That Apply the Test
Other states that use the convenience of the employer test include the following:
- Connecticut
- Delaware
- Nebraska
- New York
- Pennsylvania
The Arkansas Department of Finance and Administration previously issued a legal opinion that seemingly adopts the convenience of the employer test, though the opinion was not binding.
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Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for PayrollOrg.
