Facts: Lionel is in your office for his year-end interview for the 2022 tax year. Lionel works for a live weekly TV show produced and broadcast live from New York. It is a weekly political satire with skits by guest hosts and other forms of entertainment (music, dance and so forth dependent on the background of the guest host). It is called Live From New York, Inc.(LFNY) and is organized as an S Corporation in New York. Lionel’s job is that of a scriptwriter and he is not an officer of the company.
Lionel has written for the show for 5 years (starting in 2018) and writes primarily skits used in the live performance. He lived in New York up until April 2020 when the pandemic “hit”.
Although he had previously gone into the office every work day (to collaborate with other script writers and producers) he was forced to start working from home (under Gov. Cuomo’s executive order which shut down most businesses in March 2020 to curtail the spread of COVID.). Now working from home, Lionel decided to move back to California where his parents lived (in a large home in Atherton, California which is in the Bay Area). With the approval of LFNY, Lionel moved to California in October, 2020. Since October, 2020 and through the present date (July, 2023) Lionel has worked for LFNY from his home in California. Here is his schedule in 2022:
Days worked in California 169 days
Days worked in New York at the LFNY studios 60 days
Days worked in Colorado 15 days
Days worked in Illinois 16 days
Total days 260 days
Lionel went to New York every month for 5 days to go over scripts submitted and talk about upcoming shows/guest hosts. Lionel develops and writes the scripts in his home office in California. He then sends the script to New York for review and editing. He typically goes to NY to go over the edits and to provide “finishing touches” to the script every month.
In 2022, Lionel was asked to meet with upcoming guest hosts before they came to New York, The purpose of the meeting was to go over the script, their lines, and the procedure for filming the show live. This has worked well and he will probably be doing more of this in 2023 and forward. These are the trips that he took to Colorado & Illinois. During 2022 he did meet with 2 guest hosts in his home office (in the apartment where he lives/works located above garage).
Lionel works/lives in an apartment that is over the garage at his parent’s house. It is a large two bedroom/bath apartment and Lionel has converted one of the bedrooms into an office space. This space is used exclusively for work done for LFNY and has never been used for any other purpose. Lionel claims a deduction for home office expense on his federal tax return.
LFNY does have office space where Lionel could work when in NY. LFNY did not have this office space available during the period of time they were forced to close due to the pandemic. The “space” available is used by remote employees when they are in NY. Lionel can reserve this space in advance when he plans to be in the NY office.
LFNY paid for a scanner/fax machine and computer used by Lionel in his home office. Lionel’s parents do not charge LFNY rent for use of the space over the garage by Lionel, but LFNY does pay for an allocated share of the utilities and insurance expense and all of Lionel’s supplies (Paper, printer cartridges and so forth). LFNY does provide Lionel with a separate cell phone to use for business related calls.
LFNY pays Lionel $180,000 which you can assume is paid evenly over the year.
Required:
In 2022, Lionel, a scriptwriter for Live From New York, Inc. (LFNY), faced a dynamic work scenario due to the ongoing pandemic. His job involves crafting scripts for a live weekly political satire TV show broadcasted from New York. However, his move to California and subsequent work-from-home arrangement, combined with his interactions with guest hosts and periodic travel, raises complex state tax issues for both Lionel and LFNY.
Lionel’s work situation involves several states due to his work-from-home arrangement, periodic travel, and interactions with guest hosts. In 2022, Lionel worked a total of 260 days, with 169 days in California, 60 days in New York, 15 days in Colorado, and 16 days in Illinois. As a result, Lionel will have state tax obligations in the following states:
California: Lionel resided and worked from his home office in California for 169 days. He will need to file a California state tax return and pay state income tax on the portion of his income earned while working within the state.
New York: Lionel physically worked in New York for 60 days. New York imposes state tax on income earned within its borders. However, given the convenience rule, the days Lionel spent working in New York under 2018’s “Convenience of the Employer” rule won’t be considered as New York-sourced income.
LFNY, as Lionel’s employer, will be responsible for withholding state income tax on Lionel’s wages in the following states:
California: LFNY must withhold California state income tax on the portion of Lionel’s income allocated to the days he worked in California.
New York: Since Lionel’s physical workdays in New York were limited to 60 days, LFNY must withhold New York state income tax on the income earned during those days.
Lionel’s work schedule and interactions with guest hosts may potentially create nexus for LFNY in states other than New York:
California: LFNY’s provision of a scanner/fax machine, computer, and supplies for Lionel’s home office, coupled with his work-from-home arrangement, could potentially create nexus for LFNY in California. The presence of company-provided equipment and Lionel’s remote work situation may trigger a tax obligation for LFNY in the state.
Colorado and Illinois: Lionel’s visits to Colorado and Illinois to meet with guest hosts might create a limited form of nexus for LFNY in these states. While these interactions are infrequent, the presence of an employee conducting business activities can sometimes trigger a nexus, potentially leading to state tax obligations for LFNY.
Lionel’s work situation in 2022, involving his move to California, remote work, travel to various states, and interactions with guest hosts, creates a complex state tax landscape. Both Lionel and LFNY need to carefully consider their state tax obligations in California, New York, and potentially other states where his work and interactions occurred. Adhering to the tax requirements of these states is crucial to ensuring compliance and avoiding unintended tax liabilities for both Lionel and LFNY.
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