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Nationwide Employees Working Remotely May Run into These Tax Hurdles

Tax withholding and filing status should be updated for Nationwide employees moving to remote work to avoid surprise liabilities, says Brent Wolf, of The Retirement Group, a division of Wealth Enhancement Group.

With remote work continuing to reshape the workforce, Nationwide employees need to be aware of their tax obligations across states and having a tax advisor can help with that, says Kevin Landis, of the Retirement Group, a division of Wealth Enhancement Group.

What is it that we will discuss here:

Tax consequences of working from home including withholding and filing returns in several states.
Deductions for remote workers affected by the Tax Cuts and Jobs Act.
Considerations for employers with remote workers across states.

This COVID-19 pandemic also forced businesses into remote work and amplified a trend that was already taking place. Even before the pandemic, more Americans worked from home. From 2005 to 2019, more than 216% of all companies worldwide work remotely (GlobalWorkplaceAnalytics.com, 2021). But with millions starting to return to work, telecommuting part-or full-time is becoming standard (McKinsey and Company, 2022). But working from home has its benefits - less commuting and more flexible schedule - but it comes with tax responsibilities. Nationwide employees should know about these changes in the workforce and prepare accordingly.

These four tax considerations apply whether you work from home or contract out remote workers for a company like Nationwide:

Withholding Tax from Wages Remote working has helped many people relocate to new states in metropolitan areas and smaller cities. This mobility can cause withholding errors if you fail to notify your payroll department of your new home address. And remember that workers must have taxes withheld based on the state's tax rules wherever their employer is located. Not updating your withholding information could mean an unexpected Tax bill or underpayment penalties come Tax Day.

Some states also require that employers withhold taxes from nonresident employees' wages. For example, New York requires employers to withhold state income tax from nonresidents' wages.

Filing Returns in More than One State. In two or more states you may have to file a tax return for each state you work in. It's because many states require nonresident employees to pay state income taxes if they earned money in that state, wherever they lived. A few states even require a tax return if you worked anywhere within their borders - even on a business trip.

Note also that residents or workers of any of the nine U.S. states that do not collect income tax - Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming - will not be required to report their income to that state.

Deducting Business Expenses, The Tax Cuts and Jobs Act of 2017 eliminated several miscellaneous Tax deductions, including unreimbursed business expenses, through 2025. Therefore, expenses you incur while working from home that are not reimbursed by your employer cannot be deductible on your taxes. In past tax law, workers could deduct some out-of-pocket work-related expenses greater than 2% of adjusted gross income. But that deduction will return in 2026.

In contrast, if you are self-employed, you can still deduct many business expenses on Schedule C of your Form 1040.

We Have Workers in Several States. You own a business in one state but have a remote employee in another state - you may need to register your business in that employee's home state. It involves estimated taxes, tax returns, and other reporting to the state. If this is you, consult a tax professional who knows state and federal tax laws.

To summarize - taxes are complicated - and the trend toward remote work has only added fuel to the fire of understanding your tax obligations as an employee or an employer. For those scenarios that apply to you, we recommend that you speak with a tax advisor about how to best navigate this complex landscape.

It is obvious that remote work has many benefits including flexibility and low cost. It does bring up tax issues, however. Being informed and seeking advice can help people and businesses comply with tax laws and avoid potential problems.

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Research suggests that working from home may benefit older people's mental health. For those nearing retirement age, remote work may reduce stress and increase job satisfaction (University of Michigan, 2022). This finding applies especially to our target audience of 60-year-olds who are Nationwide workers about to retire or already-retired retirees. Aware of possible tax issues associated with working from, this group can also protect their financial interests while enjoying less stress and better job satisfaction when approaching retirement age.

Working from home is like going into unknown waters. As with sailing overseas, remote work means more flexibility. But like dangerous seas, there are hidden tax reefs to navigate. Take those tax questions as your personal compass when working from home. Like a seasoned sailor updating charts and course, you need to update your tax withholding and filing methods when you switch to remote work. Doing otherwise may trigger tax storms and financial penalties. Stay alert, hire a tax pro as your first mate, and enjoy your remote work adventure.

Sources:

Fregeau, Harrison. 'Personal Income Tax Implications of COVID-19 & Remote Employment.' Review of Banking & Financial Law , vol. 40, 2021, www.bu.edu .
Pearson, Brian T. 'How the Increase in Remote Employees Due to COVID-19 has Impacted Local Income Tax Revenues for U.S. Cities.' University of Kentucky , 2023, uknowledge.uky.edu/mpampp_etds/421.
'Charting a New Fiscal Course for Hawaii: Fiscal Architecture Approach.' UHERO , 2021, www.uhero.hawaii.edu .
'Remote worker state income tax implications.' Cornell University Division of Financial Services , 2020, finance.cornell.edu.
'Considering the impact of Remote Work on Income Tax Refunds: Michigan Municipal Governments.' Michigan State University , 2022, www.canr.msu.edu .

What are the unique benefits provided by the Nationwide Retirement Plan that differentiate it from other retirement plans? How does Nationwide Mutual Insurance Company ensure the plan meets the regulatory requirements while still addressing the needs of its employees?

Unique Benefits of Nationwide Retirement Plan: Nationwide’s Retirement Plan provides both a Final Average Pay (FAP) Benefit and an Account Balance Benefit, which allows flexibility for employees hired at different times. The plan is qualified under Section 401(a) of the Internal Revenue Code, ensuring compliance with federal tax laws. Nationwide ensures regulatory compliance while addressing employee needs through ongoing contributions, actuarial evaluations, and options like lifetime income for retirees and survivors.

How can employee participation in the Nationwide Retirement Plan impact their overall retirement savings strategy? What role does the defined benefit pension plan play in conjunction with Social Security and personal savings for employees of Nationwide Mutual Insurance Company?

Employee Participation Impact: Participation in the Nationwide Retirement Plan enhances employees' overall retirement savings strategy by integrating Social Security, personal savings, and the defined benefit plan. The FAP benefit, based on final average compensation, works alongside Social Security to offer a stable income, while the Account Balance Benefit adds flexibility in retirement income options.

What options do employees of Nationwide Mutual Insurance Company have when they retire before the age of 55, and how do these options compare to those available for employees who retire after reaching that age? What factors influence the choices employees make regarding timing and type of benefit commencement?

Retirement Options Before and After Age 55: Employees retiring before age 55 can start receiving their benefits immediately, but they face early retirement reductions. Those retiring after age 55 may choose from more benefit options like annuities and receive higher, less-reduced payments. The choice to retire before or after age 55 depends on factors like financial need and health, and affects the timing and size of the benefit commencement(Nationwide Mutual Insur…).

In what ways does the structure of the benefit formulasâ€”Final Average Pay (FAP) Benefit and Account Balance Benefitâ€”affect the retirement income of employees at Nationwide Mutual Insurance Company? What are the implications for employees considering different retirement timings?

Effect of Benefit Formulas on Income: The FAP Benefit is based on Final Average Pay and Social Security coordination, offering a larger benefit for those with higher incomes, while the Account Balance Benefit is based on accumulated contributions and interest. The timing of retirement plays a crucial role in determining income, as early retirement results in reduced benefits, while late retirement allows for continued service accrual and potentially higher payouts.

How does the Nationwide Mutual Insurance Company address spousal benefits under the retirement plan, particularly regarding the Qualified Preretirement Survivor Annuity (QPSA)? What are the actions that employees need to take to ensure their spouses receive these benefits?

Spousal Benefits and QPSA: Nationwide offers a Qualified Preretirement Survivor Annuity (QPSA) to ensure that a spouse receives benefits if the participant dies before retirement. Employees must name their spouse as a beneficiary or obtain notarized consent if they wish to designate someone else. To ensure the spouse receives the QPSA, employees must take the appropriate legal steps outlined in the plan.

What steps must employees of Nationwide Mutual Insurance Company take to successfully file a claim for retirement benefits, and what is the timeframe for processing these claims? How does the company ensure that employees understand their rights under the Employee Retirement Income Security Act (ERISA)?

Steps to File a Claim for Retirement Benefits: To file a claim, employees must notify the Nationwide Retirement Center at Fidelity and submit the required paperwork. Claims are typically processed within 60 days, and Nationwide ensures that employees understand their rights under ERISA through detailed communications and support from Fidelity Investments.

What are the situations that might cause delays or loss of benefits for employees retiring from Nationwide Mutual Insurance Company? How can employees proactively manage these risks to ensure they receive their entitled benefits?

Situations Leading to Delays or Loss of Benefits: Delays can occur if employees fail to submit necessary paperwork, keep their contact information updated, or if they are not vested at the time of severance. Employees should proactively manage these risks by completing forms timely and maintaining communication with the Plan Administrator to avoid disruptions in benefits.

Can employees at Nationwide Mutual Insurance Company alter their distribution choices after commencing their retirement benefits? What regulatory frameworks influence their ability to change benefit elections, and under what circumstances might these changes be permitted?

Changing Distribution Choices After Retirement: Once retirement benefits commence, changes to distribution elections are limited. For example, lump-sum payments and annuity selections are typically irrevocable after commencement, and spousal consent is required for certain changes. Federal regulations, such as IRS rules, further restrict post-retirement changes in benefit elections(Nationwide Mutual Insur…).

How does the Nationwide Mutual Insurance Company plan for automatic post-retirement benefit increases, and what factors determine the percentage increase? How do these increases impact the long-term financial security of retirees?

Post-Retirement Benefit Increases: Nationwide offers automatic post-retirement benefit increases for participants with service before 1996, with annual increases between 0% and 3% based on fund performance. These increases help to protect retirees’ long-term financial security by adjusting their pension income for inflation.

How can employees contact NDPERS for more information regarding their retirement options, and what specific resources are available for personalized assistance? Clear communication channels and support services are essential for helping employees navigate their retirement planning effectively with NDPERS.

Contacting the Nationwide Retirement Center: Employees can reach the Nationwide Retirement Center at Fidelity by calling 1-800-238-4015 for inquiries about their retirement plan. Fidelity provides detailed support, including benefit estimates, plan information, and assistance with filing claims and selecting benefit distribution options(Nationwide Mutual Insur…).