You work from home…but where do you pay taxes?
In our post “Living in One State, Working in Another“, we explained how to file state taxes if you work in one state but live in another.
However, with all the (exciting) advances in technology, more and more individuals are trading in their commutes to the office to instead work remotely from home.
If you work remotely and the company you work for is in a different state than you live in, then your tax situation will differ from someone who physically travels to another state for work.
We understand that you may have no idea how to file your state taxes. We’re here to help!
File taxes to one or two states?
Depending on your specific tax situation, you may need to file two state tax returns; a resident return and a non-resident return.
As a refresher:
-
resident-state: the state where you live. Your resident state taxes ALL of your income, regardless of what state it’s earned in.
-
non-resident-state: a state you did not live in over the past year. Different states have different non-resident tax laws on who is required to pay non-resident taxes.
Although certain states have varying non-resident tax laws, generally, if you live in one state and work in another remotely (so you don’t physically travel to another state for work), then you would only file and pay taxes to your resident state.
That means, if you’re working remotely you’ll only have to file a resident tax return to the state you live in.
However, if your W-2 form (that form you receive at the end of the year or beginning of January) lists a state other than your resident state, then you’ll need to also file a non-resident tax return to the state listed. In other words, you’ll file two state tax returns; a resident return to the state you live in and a non-resident return to the state listed on your W-2 (the state your company is located in).
Report ALL earnings on your Resident Tax Return!
The most important thing to keep in mind if you work remotely is that you’ll need to report your income earned (no matter what state it’s from) on a resident state tax return (unless of course, you live in a income tax-free state).
For example, let’s say you work remotely from your home in New York for a company located in California. When you receive your W-2, you see that there’s no reference to CA withholding. In this case, you would not have to file or owe CA state income tax. You’d report all of your income earned from your remote work (and any other earnings) on a New York resident state tax return.
Here’s another example- If you’re working remotely from your New York home for a company in California and receive a W-2 form with two states listed, both NY & CA, then you’ll also need to file a CA non-resident tax return. On this non-resident return, you’ll report only the information listed on that W-2 form.
If you end up being double-taxed, your resident state entoitles you to a credit for the taxes paid to the non-resident state. This should be a dollar-for-dollar reduction.
Who Doesn’t Need to File a State Return (income tax-free states)
You’re off the hook from filing a resident tax return if you live in one of the following income tax-free states;
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
So, if you work remotely from your home in Florida, you won’t need to file a resident tax return. In fact, you probably won’t need to file any state tax returns, unless your W-2 form indicates another state’s tax withholding.
Let us do the state calculations for you.
We know that state taxes are a lot to wrap your head around. Rather than trying to figure out what you owe, we’ll do all your federal and state calculations for you at once. You’ll simply enter the information listed on your W-2 form(s).
Calculating state taxes can be a headache- avoid all tax headaches with RapidTax!
So then for the 1099, i file Federal with NY or FL?
Hi. I lived in NY and moved to FL in July. I started working for the company i worked for in NY remotely, but once i moved to FL, I’m now getting a 1099. So i file my taxes for both states? Am i going to have to pay taxes in both states? Thank you in advance.
Hi!
This is a complicated one. I lived in NYC but worked in NJ for the first half of the year, and then moved to California, but continued to work remotely for my company in NJ. My terrible HR dept. didn’t update my address, so NJ still withheld tax on my income…but in trying to fill out the Schedule S Californian return, it says that the ‘source [is] where the services are performed’…which was California. Do I file for credit from California for the taxes paid to NJ, or do I need to find a way to get NJ an amended W2 and tax return so that they refund me for the ‘source’ income that wasn’t sourced in NJ?
Hi Andrew,
Although your HR department did not update your address, you’ll still file taxes according to your situation. In your case, you will file a part year resident return for NY, a part year resident return for CA, and a non resident return for NJ. On the part-year resident returns, you will be asked to provide the dates in which you resided in each state. You will be taxed based on this information (regardless of what your company withheld from your pay throughout the year). Chances are, the amount you had withheld for NJ taxes was too much since you moved to CA mid-year. If this is the case, after filing, you will be issued a refund (or credit) for the excess tax you paid. The same goes for the amount you paid to NY after moving to CA.
You’ll want to keep in mind that while you continued to pay taxes to NY and NJ, you weren’t having taxes withheld for CA. This means that you could have tax due to CA after filing.
I live in Florida and will start work remotely for a company with headquarter in Georgia. I don’t need to travel to GA. If my paycheck does not deduct GA income tax, does that mean I don’t have to file a GA non-resident income tax? If my company deduct GA income tax, then I will have to file GA non-resident income tax to get my money back. Correct?
My company also has a regional office in FL (not the place I live). I am wondering if I should ask the company to use the regional office do my payroll, that will eliminate GA once for all, is that correct?
Thank you so much!
Wilson
Hi Wilson,
That is correct. You are only responsible to pay tax to the state where you physically work and earn an income and where you reside. If your company is withholding GA tax from your paychecks, then you will file a nonresident GA return to claim back the money that was withheld. In regards to your other question, that seems like a good solution. You can definitely speak with your HR department and see if they will accommodate you by processing your payroll in Florida.
I live in Charlotte, NC and work online for a company based in Turkey. I am paid electronically via paypal, and will not receive a W2 or 1099 from the company in Turkey. How do I pay taxes on the income that I earn? Thank you.
Regards,
Hi Dwayne,
Foreign income is typically taxable by the country where you earn it from and where you live while earning it. You will report this income on your tax return as you would U.S. income. If you are using Rapidtax.com, you will report it within the foreign income section. If you are filling out the IRS forms yourself, you will report this income on line 7 of the Form-1040. The IRS will make the necessary adjustments for your tax liability.