Illinois seeks to establish a 30-day safe harbor against state income tax for nonresident employees under a recently proposed regulation that specifies how workers should calculate their number of days worked in the state. In an article by Law360, David Hughes explains how different this proposed rule is when compared to previous regulations, noting that previous regulations on taxing nonresident income was an outlier among the states.
With this proposed rule, employers will need to withhold Illinois income tax only for nonresident employees who work in Illinois for more than 30 days, which will apply for tax years ending or after December 31, 2020. Under prior law, in-state compensation was based on the location of the base of operations, the place from which services were directed or controlled or the individual's residence in the state.
David explains that overall, the new proposed regulation would be easier to apply than Illinois' previous rule and should provide a friendlier landscape for taxpayers. "The purpose is to create a little more certainty and clarity for employers and nonresident employees," David said.