Tax Withholding Guidance

What should a business due regarding tax withholdings if it has out of state employees temporarily working remotely due to the coronavirus pandemic (COVID-19)?

The Rhode Island Division of Taxation has provided new guidance for employers who have implemented remote working requirements for their employees. Some of these employees may now be performing services outside Rhode Island where they were providing them in Rhode Island before COVID-19. When this happens, an employer would typically have to withhold and remit out-of-state taxes for employees.

The new emergency regulation simplifies the tax withholding process. It states that the income of employees who are nonresidents (temporarily working outside of Rhode Island solely due to COVID-19) will continue to be treated as Rhode Island-source income for Rhode Island withholding tax purposes.

What should an out-of-state business due regarding tax withholdings if it has employees temporarily working remotely in Rhode Island due to COVID-19?

Conversely, Rhode Island will not require employers located outside of Rhode Island to withhold Rhode Island income taxes from the wages of employees who are Rhode Island residents temporarily working within Rhode Island due to COVID-19.

Please see http://www.tax.ri.gov/Advisory/ADV_2020_22.pdf for more information regarding this guidance, including links that provide information from neighboring states. Note: this advisory is for general information purposes only, and not a substitute for Rhode Island General Laws, or for Rhode Island Division of Taxation regulations, rulings, or notices.

For more details, please visit: https://rules.sos.ri.gov/regulations/part/280-20-55-14 or contact us at 401-831-0200.

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