On November 9, 2020, the Pennsylvania Department of Revenue issued guidance relating to telecommuting and related tax implications.  If an employee is working from home temporarily due to the COVID-19 pandemic, the Department does not consider that as a change to the sourcing of the employee’s compensation.  For non-residents who were working in Pennsylvania before the pandemic, their compensation would remain Pennsylvania-sourced income for all tax purposes, including PA-40 reporting, employer withholding and 3-factor business income apportionment purposes for S corporations, partnerships and individuals.  Conversely, for Pennsylvania residents who were working out-of-state before the pandemic, their compensation would remain sourced to the other state and they would still be able to claim a resident credit for tax paid to the other state on the compensation.  For a Pennsylvania employer with a non-resident employee temporarily working from home due to the COVID-19 pandemic in a state that does not have a reciprocity agreement with Pennsylvania, the Department advises that the employee’s compensation remains Pennsylvania sourced, and the employer is required to withhold on the compensation.  This guidance will be in effect until the earlier of June 30, 2021, or 90 days after the Proclamation of Disaster Emergency in Pennsylvania is lifted (“end date”).  As of that end date, the guidance is rescinded and all prior tax rules are applicable. (Telework During the COVID-19 Pandemic, PA Department of Revenue, 11/09/2020.)