COVID-19 sent many workers back to the house to work remotely. Some of those workers moved to Montana seeking to escape the city and work in a rural environment. The question becomes, what are the Montana income tax obligations of workers who now work remotely from Montana.
For the worker who is unquestionably a resident of Montana, the worker will be taxed in Montana on all of the workers worldwide income. If the worker has income attributable to other states and thus must pay income tax in another states, Montana permits a dollar for dollar tax credit for income tax paid in other states. Thus, the worker in Montana is not penalized for taxes paid in other states. However, if the other state does not have an income tax, such as Wyoming, Washington, Texas and Florida, the entire income is taxed in Montana.
If the worker working remotely in Montana does not wish to be taxed as a Montana resident and subject his or her worldwide income to Montana income taxation, the taxpayer must avoid the two part test that the Montana Department of Revenue uses to determine residency: (1) presence in the state and (2) intent to remain. Generally, the taxpayer will want to avoid:
- Montana driver’s license
- Montana voting
- Montana jury duty
- Montana in-state hunting and fishing licenses
- Montana in-state tuition
- Other indicia of presence and intent to remain in Montana
Of course, the taxpayer will need to continue having these items in another state, including residence and other necessities of life.
Practice Point. If a worker moves to Montana to work remotely and intends to remain and manifests that intent by buying a house, Montana license, Montana voting and the like, the worker will be taxed as a Montana resident on his or her worldwide income. Conversely, if the worker who comes to Montana to work remotely does not want to be determined to be a Montana resident, that worker must avoid the same list.
About the Author. Jared M. Le Fevre is a Partner in the Tax, Trusts and Estates Practice Group of Crowley Fleck PLLP. Mr. Le Fevre represents taxpayers before the IRS, IRS Independent Office of Appeals, Tax Court, Federal District Court and state tax agencies throughout Montana, Wyoming, North Dakota, Idaho, and Utah. Mr. Le Fevre is involved in federal, state and local tax audits, appeals, and tax resolution throughout these western states. Mr. Le Fevre also advises clients on the tax effects of business and real estate transactions.