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Working Remotely in Different States? Find out Where You Need to File Taxes

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In Education Posted September 03, 2021

Several bills under consideration would change the way remote workers are taxed based on their location. The Remote and Mobile Worker Relief Act of 2021 would not let states tax or require withholding on nonresident employees who are in a state for less than 30 days. A similar bill called the Mobile Workforce State Income Tax Simplification Act of 2021 is pending in the U.S. The intersection of tax withholding, remote work, and local tax rules can be seen in the dispute between Massachusetts and New Hampshire in 2020 over nonresident taxation.

Arizona, for instance, shares agreements with California, Indiana, Oregon, and Virginia. But, the four other states that share its borders aren’t included in the reciprocal agreement. Visit your employee’s state’s Department of Revenue to find out exactly what you need to know about reciprocal agreements. “States have become aggressive, especially on the coasts, seeking to tax employees who aren’t present in their state,” Hagerman said.

Did you work remotely last year? A surprise tax might be waiting for you.

A permanent remote worker will file their personal income taxes in their state of residence, whether they are a W-2 employee or a 1099-NEC independent contractor. Having a remote and distributed team can lead to the complicated issue of remote work taxes. You could be responsible for additional employer withholding and sales tax responsibilities if you have workers in another state who don’t work in a company office. However, this differs based on the states where your employees live and where your organization is located. If you have a telecommuting employee in a different state than your office location or have employees in multiple states, you must withhold income taxes for the state they live and work in.

Your home workspace’s eligibility for a tax deduction depends on your employment status and how you use the space. We do this with a simple and friendly platform, expert support from real people when it’s needed, and access to corporate-level benefits that ensure people feel secure and valued. The Scoop is your go-to resource for staying up-to-date on federal and state employment laws and regulations. While it is the employer’s responsibility to apply tax law correctly, any missteps it makes will ultimately impact you financially. So be sure to verify, validate and follow up on any action taken to ensure the proper result.

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15While Philadelphia maintains a “requirement of employment” standard, temporary relief was provided during the pandemic. 5For a further discussion of the erosion of nexus protection and the burden on small businesses, see Stanton, “Erosion of Nexus Protection and the Burden on Small Businesses,” 52 The Tax Adviser 182 (March 2021). The New Jersey Division of Taxation (Division) took the position that TeleBright was liable for the CBT because it was “doing business” in New Jersey by permitting how do taxes work for remote jobs the employee to work from her home within the state. In response, TeleBright asserted that it was not “doing business” in the state and further challenged the Division’s position based on both Due Process and Commerce Clause grounds under the U.S. Sign up to receive more well-researched small business articles and topics in your inbox, personalized for you. Most other self-prep platforms charge around that amount for each state return, so you could save $50+ just by filing with us.

If your remote work crosses state lines, determining how much income tax to pay which state can be challenging. A worker may have tax obligations in any state where they reside and possibly the state where their employer’s worksite is located. The state where you permanently reside is called your “domicile,” but you can also be a resident of a state if you spend a certain amount of time https://remotemode.net/ there. Most people are domiciled and reside in only one state, but working remotely in another state may change things. Residence may be established by a statutory test, which is different in each state, but it is usually determined by the amount of time that a person has spent in that state. A state may also use a worker’s domicile to determine their residence for tax purposes.