Federal income tax isn’t the only tax concern for employees and self-employed individuals. Usually, you must also adhere to state income tax requirements. For instance, in one highly-publicized new case, Matter of Zelinsky, DTANOS. 830517 and 830681, 5/9/25, a law school professor working from home contested a state law requiring him to pay tax to a different state than the one where he resides.
The latest twist in this ongoing saga arose during the COVID pandemic, but there are longer-lasting tax implications. This especially important since a large segment of the workforce continues to telecommute while others are switching to more remote work to the accommodate the changing needs of the business world.
Background: Generally, employees pay state income tax to the state where they live. However, in some cases, tax may be owed to a different state if that is the place where you actually work. The prevailing laws differ from state to state, although some states have reciprocity agreements with states that they border.
Of course, state income tax rates also vary among the states. It’s not unusual for one state to have significantly higher or lower rates than a neighboring state. In addition, in recent years many states have become more aggressive in pursuing state income tax from non-residents.
Facts of the case: Zelinsky, a resident of Connecticut, was a law school professor at Cardozo School of Law in New York City. He generally taught classes to students at the university three days a week and worked from home the other two days a week.
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Going back as far as 1994, Zelinsky challenged the imposition of state income tax on his earnings by New York as being unconstitutional. He apportioned his salary between time spent working in New York and time in Connecticut on his 1994 return and paid state income tax accordingly. But New York assessed tax deficiencies against the professor and prevailed in court. Notably, the court relied on the “convenience of employer” test in New York. Under that rule of law, a taxpayer is liable for New York tax unless the taxpayer can show they were working from home in a different state for the employer’s convenience.
The issue arose again in 2020 when the law school closed down to physical access during the pandemic. Zelinsky taught classes from home via Zoom and continued to perform all his legal research and writing in Connecticut. For most of the year, no classroom or office was available to him on the Cardozo campus. But the New York courts continued to rule that Zelinsky was liable for New York state income tax on the full amount of his compensation as a law school professor.
Finally, a law tribunal sided with the New York authorities again. Although the tribunal acknowledged that there was a change in circumstances due to the pandemic, it said that Zelinsky was working from home for his own convenience.
Undoubtedly, we have not heard the last word on this issue as Zelinsky plans his next legal move. Moral of the story: You will likely face an uphill battle if you challenge the imposition of state income tax by the state where income is officially earned.
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Tags: accounting law, Income Taxes, IRS, tax court, tax deductions, tax law, tax professor, Taxes
