For taxable years beginning on or after January 1, 2019, compensation derived from Connecticut sources by a nonresident includes income from days worked outside the state for the employee’s convenience, but only if the nonresident’s state of domicile imposes a convenience of the employer test.

Convenience of the employer test

Pursuant to the convenience of the employer test, compensation earned by a nonresident employee is allocated to the location of the assigned or primary office of the employee, unless the work the nonresident performs is work which, of necessity, and not convenience, obligates the employee to work from a location other than the assigned or primary office.

If an employee’s state of residence uses a convenience of the employer test when determining the source of income of a nonresident, and the employee works for a Connecticut employer from a location in another state for the employee's own convenience, then the employer must include those days as days worked in Connecticut for purposes of determining the Connecticut source compensation of the employee for wage withholding and personal income tax purposes. There are currently four states that impose the convenience of the employer test: Delaware, Nebraska, New Jersey, New York, and Pennsylvania.

Nonresidents and part-year residents of Connecticut who perform services for their employers at locations that are not their primary work places, along with their tax preparers, should take the convenience of the employer test into account in determining the Connecticut source income of nonresidents and part-year residents.

What does CohnReznick think? 

It is important to be aware of the change to Connecticut compensation sourcing rules and how it may impact you, since the proper allocation of income to Connecticut may change for 2019 and subsequent years because of the convenience of the employer test.

For more information, please contact:
Matt Nick, Director, State and Local Tax Services
[email protected]
860-271-7933

Cindy Galamgam, Senior Manager, State and Local Tax Services
[email protected]
959-200-7239

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