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Dec 11, 2013

With no less than 41 different state income tax reporting requirements, employer groups and trade associations have been giving their support to two bills in Congress that would simplify tax rules nationwide.

Instead of requiring state withholding and tax filings by both employer and employee after only a day of working in a state, the simplified rules would require non-resident workers to comply with local tax rules only after having worked in the state for 30 days.

Among the industries especially impacted by multi-state tax situations are staffing firms that place workers in short-term on-site positions, as well as employers with multiple offices across the country.

Depending on where an assignment is located, an employer may have to pay state taxes and workers have to multiple income tax forms to file, just to get a modest refund of their withholdings.

Bills introduced in both House and Senate

An initial bill — H.R. 1129 Mobile Workforce State Income Tax Simplification Act of 2013 – was introduced in the U.S. House of Representatives in March. Sent to the House Judiciary committee, where it currently awaits action, the bill is given little chance of passing the full House.

Last month, Senators Sherrod Brown, D-OH, and John Thune, R-SD, introduced a similar bill in the U.S. Senate, which quickly gained support from multiple employer and tax groups.

In a press release issued when the bill was introduced, Brown said, “This common-sense legislation will help simplify and standardize tax filing for employees and employers that conduct business in multiple states.”

A “common sense response”

Thune said, “Our legislation would establish a clear, 30 day threshold test for state income tax purposes, preventing individuals from having to sort through the complicated tax reporting burdens from the multiple states where they travel for work.”

In supporting the bill, the American Institute of CPAs President and CEO Barry Melancon, called the simplification measure, a “common sense response to the taxation confusion experienced by mobile workers and their employees.”

The list of supporters includes several business groups with employees or members who live in one state, but regularly work in different places during the year. Among them are the Motion Picture Association of America and Motion Picture Association of America and the National Association of Manufacturers.