Some US states are adopting two types of convenience rules, one for employer and one for employee. The Convenience of Employer rule is taxation that is supported by existing processing in Dayforce. Under the Convenience of Employee (COE) taxation rule, employees are subject to both the income tax laws of their employer's state and their resident state if they work for a business that is located in a state or locality that adopts a COE rule and they perform their work from another state or locality at their convenience. Therefore, the employee is subject to tax and wage reporting in the COE state. The following states currently apply the COE taxation rule: Connecticut, Delaware, Nebraska, New York, and Pennsylvania. The following localities currently apply the COE taxation rule: Wilmington, DE; Yonkers, NY; and Philadelphia, PA.
For example, an employee lives in New Jersey and works from home at their convenience for a Connecticut employer. The employee is subject to the rule because Connecticut regulations include the convenience rule. Similarly, say an employee in the same company works in Virginia at a family member's home, at the employee's convenience. However, the employee normally lives in New Jersey and would be assigned to work in the office in Connecticut. This employee might have tax and wage calculated for all three jurisdictions.
By default, taxation under the COE rule in Dayforce is turned off. To configure the COE rule, go to the Projects feature, and select Enable Convenience of Employee (COE) Taxation (US Only) in the Payroll section in the Properties tab of System Admin > Client Properties. Ensure that you are familiar with the elements in the Details tab of the Projects feature. See Configuration of Project Taxation for US Employees.
In the Projects feature, if a top-level or child project is located in any of these five states, a COE Project checkbox is available that you can use to designate that a project and the employees who are included in the project are subject to COE taxation. When you select this checkbox, the Dayforce tax engine enables taxation for the states that have COE regulations. The employees who are primarily assigned to work in these COE states have taxable wages for both the project location and the COE state. In addition, the Dayforce tax engine receives the COE value with the project information when earnings are associated with the project. Local taxation for jurisdictions in those states are also applied, based on the taxation address of the primary assignment.
When employees have hours in a project that are designated for COE, the tax engine passes the project wages and a COE tax type wage from their primary assignment in any of the five states. The tax engine also passes the project wages and a COE tax type wage if a work location override or virtual address is configured, if applicable. The tax engine then calculates wages and taxes for the project and the COE state.