Weird lateral issue Forum

[calripkenjrjr]

I just lateraled as an associate from a big firm in State A to one in State B. I am nearly entirely happy with the change, with just one problem...

It turns out that State B has a much lower state income tax rate than State A. However, the new firm is refusing to pay me with State B on my paystub, since I am not yet admitted to the Bar in State B, and won't be for many months. They are insisting I am working at the firm's office in a city in State A, despite the fact that I have never been to that office and never even spoken to a single attorney there. So they are withholding taxes from State A even though I am not in State A, have no plans to return, and have no connection to the office in that state whatsoever. (The laws in State A are such that I cannot get a refund for the money they withhold as a nonresident.) I asked them to designate me as a law clerk or equivalent in State B until I pass the Bar there (isn't this what most firms do?) and they said in order to do that I would have to go part-time and accept a lower salary, among other horrors.

Has anybody encountered this before? Is there anything I can do here, short of some self-defeating scorched-earth lawsuit? The offer letter I signed was for a city in State B, I had no idea they were going to do this to me until Day 1 at the new firm, and there's a pretty decent amount of money on the line.

[Anonymizer]

Depends on the states, how they treat residency and part-year filers. First thing is to pass the bar in or waive into State B. If you’re not a tax attorney, you prob want to hire someone who is more familiar with filing returns in multiple states. Ultimately, you may be able to file taxes as a part-year resident in State B, and file part year taxes in State A that reflect you’ve filed in State B. If that’s the case, then you may still get the extra refunded back from State A. But it’ll take longer and prob only work out on the back end. Suing the new firm seems like a mistake unless you want to sabotage any future there. Good luck!

[CanadianWolf]

I'll state the obvious: Your new law firm views this as an unauthorized practice of law issue.

OP: What is the tax percentage involved ?

[calripkenjrjr]

We're talking ~5% of my paycheck for at least six months.

Indeed, they see it as an UPL issue, which I get. Yet I've never heard of another associate in my situation being put in this kind of set-up. Isn't that what those asterisks in peoples' email signatures are for? ("*Not licensed to practice law in [name of State].") I can't name another industry where an employee would show up for work in State A and be told they "work" in State B until further notice... Even for biglaw, is this the norm when moving from one state to another?

[Anonymous User]

Are you working in an office in State B? Or just working remotely in State B and assigned to an office in State A?

In any case, this may be a helpful resource: https://www.peoplekeep.com/blog/how-do- ... peoplekeep (it's really a state law issue, and your firm should absolutely comply with state tax laws, whatever they say). At my firm, they resolve the "unauthorized practice" issue by having everyone be supervised by attorneys in their assigned office. But the unauthorized practice issue really won't override the state tax issue. If you find out what the rules are in your state (for remote working if you're working remote) then you will know quickly whether HR is wrong. If they're not wrong you can't do anything about it but get yourself barred in State B ASAP and talk to an accountant.

[Monochromatic Oeuvre]

Someone with experience in the area could speak if you had any remedies other than to recover what you’ve been wrongly taxed on; if not, I think you’re fucked.

There is absolutely no law that would require an employer to withhold State A taxes from an employee who lives in State B and is required to physically work in State B (it would probably just be a per se due process violation?). If your offer letter says your position is with State B’s office, you’d win a state tax appeal. Tax departments don’t give a shit what UPL issues you’re trying to sort out.

But…your firm has every right to condition a State B offer on you getting admitted in State B and they’re not obligated to let you work under the supervision of State B attorneys. And even if they were, at-will employment is what it is.

You’re right; almost every other firm would have you work under local attorney supervision. I’m not sure what advantage Firm A sees from doing it this way (perhaps someone who knows the area well could chime in). But it sounds like you already tried bargaining out of this one.

[calripkenjrjr]

Thanks all. Yes, I physically show up for work in State B, making the whole thing feel even more bizarre. (Solidarity and all for the permanently-remote associates among us, but trying to turn over a new leaf at new firm.) State tax appeal is a good lead, and I'll look into it. After more research I think there may be hope via a sort of obscure provision of State A's tax laws, however, I would still need to convince the firm to report me as a kind of temporary worker in State A. With the brick-wall HR has shown me so far, need to be careful on how I approach this idea, and my gut says they'd not be enthused to try it. I really do like the new firm, people are great there and set-up is a massive improvement for me, etc... this procedure just strikes me as needlessly harmful to me with no actual benefit to the firm.

[Anonymous User]

If you are assigned to State B's office and showing for work there and living there, but the firm wants to say you're in state A for licensing reasons, that should not be driving the tax result. I would probably go talk to someone in the tax group at your firm, not to tattle, but because tax lawyers love this stuff and if your firm is actually doing it wrong they can figure it out and there is nothing they will love more than telling HR they are wrong about something.

[alawyer2018]

If there was a partner at the new firm that was heavily involved in your recruitment, I would raise this with them if HR continues to stonewall. If you have no connection whatsoever to State A (except that you're licensed to practice there), it's beyond comprehension to me that the firm would insist to report you as working there for tax purposes because that's plainly not the case. A poster above said to look at the offer letter, and I agree you should do that and raise this issue further if the letter is clear you'd be in State B. Unless I'm missing something, I don't understand how you personally can report income in State A (and not State B) under the circumstances you described.

[Anonymous User]

If you are assigned to State B's office and showing for work there and living there, but the firm wants to say you're in state A for licensing reasons, that should not be driving the tax result. I would probably go talk to someone in the tax group at your firm, not to tattle, but because tax lawyers love this stuff and if your firm is actually doing it wrong they can figure it out and there is nothing they will love more than telling HR they are wrong about something.

Biglaw partner. At my firm, there is a dedicated group of non-lawyer tax professionals who do stuff like preparing the firm’s composite return, advise on whether to elect into various state PTE programs, etc. I didn’t know that they existed before I made partner, but I would probably go to them before going to lawyers in your firm’s tax group.

[calripkenjrjr]

Really appreciate these additional suggestions -- finding/contacting the tax committee of non-lawyers will be my next step, then will escalate to tax partner(s) if need be.

As for my offer letter, it says: "You will be a member of the [____] Group of our [____] Department, resident in our [city in State B] office." It further says: "In light of your assignment to our [city in State B] office, you will be required to be admitted to the Bar of [State B] within one year of your date of hire." There is no mention of State A, nor the office in State A.