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:
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resident-state: the state where you live. Your resident state taxes ALL of your income, regardless of what state it’s earned in.
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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!
Last year we moved from California to Colorado. My husband starting working in CO on April 11th (living in temporary housing while looking for and buying a house) while the kids and I stayed in our rented CA house until June 17th (when school got out and my job ended). During that time (mid-April to mid-June), my husband’s income was taxed in *both* states (as a resident of CA but physical presence in CO).
Double-taxation is not allowed, in theory at least, so one state should give a credit for the taxes collected in the other state, correct? We will be filing state tax forms for both CA and CO (part-year residency in each state) but which state return should file for the “double taxed” credit…CA state return should request a tax credit from CO? Or vice-versa?
Generally two Part Year Returns do not offer a Credit for taxes paid to another state since the income is not taxed by both states. However, in your case the employer has taxed both states. Some states offer worksheets to indicate Double Taxed income computations. Unfortunately these are the simplest answers we can provide as there are many determinant factors to how you should file. Our customer service representatives could assist you in determining these questions and figuring these computations if you were to prepare your tax returns with us. Thank you.
I live in Kansas but work for a company as an independent contractor in many states. The company is based in Missouri, but none of the actual work has been done in Missouri. Should I file as a resident in Kansas and as a Non-resident in every other state I’ve worked in (according to the state’s specific guidelines)? How should I file in Missouri, if at all?
I received a 1099-MISC tax document
If you received a 1099-MISC with your income reported in box 7 “non-employee compensation” you are considered self-employed. The IRS requires that you report this income on a Schedule C. Rapidtax expertly handles Self-employment income. Click here to get started today.
If you did not physically work in Missouri, you may not be required to file a Non-resident return for that state. If you have 1099-MISC’s for multiple states, you will need to file a state return for each state that you for which you have taxes withheld. Generally, if the state you reside (Kansas) in has an income tax, you have to file a resident tax return with that state, as well as a non-resident return in any other taxable states where income was generated. Rapidtax expertly handles resident and non-resident returns. Click here to get started.
I moved to Virginia from the US Virgin Islands in Sept 2016. I work remotely for a company that is based in the US Virgin Islands because of this I am required to file Federal Income taxes in the US Virgin Islands (Our tax dollars are kept in the Virgin Islands). We do not pay state taxes…Should I have to pay taxes in Virginia?
You may be subject to special tax rules. Your tax treatment of your income depends on whether you are a U.S. citizen, a dual citizen, permanent resident or a foreign citizen without a green card. If you are a resident alien required to file a Federal income tax return, then you must file a Virginia State tax return.
Hi There,
I currently work out of my company’s HQ in New York. I am looking to move down to Florida and work remotely at my current company but my company is not willing to get a license to practice business in FL. I also have family in NYS and wanted to know what the implications were if I was to put my residence as my family’s address (which I would visit quite frequently) but spend the majority of my time in Florida at an apartment that would be leased under my name.
Is this allowed? what are the risks involved in doing this? How much time to I have to spend at the NYS address in order to be considered a resident?
Any help would be greatly appreciated.
Max
I work in a sales position if that has any impact on things.
You most likely cannot have more than one domicile and might not be able to file in this manner. Unfortunately there are many if, and, and buts involved with these questions and they cannot be answered simply without additional correspondence and research. However these are the kind of questions our tax professionals could assist you with further if you were to prepare your returns with us. Thank you.
I reside in Ohio. I am employed as a contractor and have worked exclusively overseas (Iraq and Afghanistan). All work performed was exclusively in Afghanistan and Iraq. Am I still expected to pay Ohio personal income tax for this income, even though I didn’t technically work “in Ohio”…or even “in the USA” for that matter?
If you are a US citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by US law.