How will shelter in place orders impact tax obligations?

States throughout the country have issued shelter-in-place and stay-at-home orders in an effort to reduce the spread of COVID-19. Even those who have not received official orders may be taking similar actions on the advice of the federal government and medical professionals. Although social distancing may curb the spread of COVID-19, it could also result in unforeseen consequences. One example: tax issues. 

How can sheltering in place impact tax obligations?

Not everyone chose to shelter in place in the same state they choose as their residency for tax purposes. Furthermore, some people have been more or less prevented from leaving a state they were visiting before travel restrictions were implemented. Regardless of the reason for remaining in another location, tax professionals are voicing concern that the move could result in unintended tax consequences . Specifically, depending on the length of time spent in a state, local taxing authorities may claim the individual or business has to pay local taxes.

Issues can be even more complex for those who sheltered in another country. In these situations, bilateral tax treaties could have information about permanent residency to help navigate these issues . One potential problem: whether or not businesses will be taxed in another country when their employee is there due to the coronavirus pandemic.

The easiest answer to these questions could come from federal regulation. We will watch the issue and provide an update if the feds make such a move to provide clarity during these difficult times. 

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