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!
Question; I live in California and work remotely from California for a Florida subsidiary of a large corporation (I since changed jobs from HQ in Philadelphia to Miami). I just noticed that my employer is not taking state taxes out of my paycheck at the start of 2017 due to change in position from Philadelphia to Miami.. For the last 18 years, they were withholding CA tax, but this job change seems like it messed things up. Do I need to inform Payroll to fix it to move it back to withholding CA tax? I am concerned about not having any CA tax taken out and having to pay a big chunk next year. Thx
It would be best for you to contact payroll on advisement with proceeding with this matter. Typically payroll has their specific reason as to why they would being withholding state taxes pertaining to which state. For the case of Florida the sudden stop of state taxes withheld may be due to them relocating to Miami, and the state of Florida, where residents are state tax exempt.
I am moving to NY state in June, but will continue to work remotely for my employer in Iowa. HR is asking me how I want my taxes handled, because they will have to open accounts in NY in order to allow that state to withhold.
From what I’m reading, it looks like I could have Iowa taxes withheld, then file both Iowa part-year resident and Iowa non-resident as well as NY resident for the 6 months that I live there. Then Iowa will refund me for what was withheld over the last 6 months of the year. Is that correct? What forms will I need to file 6 months worth of resident income in NY, when my W2s will only have full year income with Iowa withholding?
Be advised, you would not be able to file more than one state return per state per year; it would either be Part-year or Non-Resident for each state.(Ex: You cannot file both ‘Part-Year’ and ‘Non-Resident’ IA returns, you would only be able to file either a ‘Part-Year’ or a ‘Non-Resident’ IA return per year).
You should be preparing a ‘Part Year IA’ and a ‘Part Year NY’ returns (no full-year resident returns). Since the employer is giving you a choice, you should have them withhold IA taxes while your are in IA, then NY taxes while your are in NY. This way you will save yourself additional steps and your income would be allocated to both states on your W-2’s based on what is reported on your W-2 Boxes 15-20. However, if they withhold IA taxes the whole year, then you would have to manually specify and pro-rate on your ‘Part Year NY return’ how much of your IA income was earned while living in NY.
Hello!
I have a funny situation I don’t know how to deal with…
I’m not a US Citizen, I am not a resident alien, I don’t even live in the US, I live in Costa Rica. The only attachment I have with the US is an LLC-S incorporated in Florida, I’m the only owner of it.
I use this LLC to collect dues from companies all over the Caribbean and Central America (again, no business held in the US whatsoever); so, I give consultancy to various clients, and when finished, I asked them to submit their payment to my LLC in Florida, to a bank account under my LLC name, and as a final step, I pay myself overseas (Costa Rica) as Overseas Services description. I am not employed by the LLC, I am just the owner.
My question is: do I have to file taxes in the US (FL)? Do I owe something to the IRS?
Thank you! I hope you can help.
Unfortunately since we do not prepare or specialize in returns containing foreign income and/or foreign residency information, we will not be able to determine these answers for you. We apologize for the inconvenience. Please contact the IRS for more information for your situation.
I live in NC, but work for a company in CA. My W-2 shows state taxes withheld for CA. Right now, my tax filing says I owe state taxes to both CA and NC. How is that possible? Thanks for the help.
Since you resided in NC you have to file a resident return for this state and a non-resident return for the state where you earned income CA. You must ensure that you received a credit from NC for taxes paid to CA. You can end up owing both states if your employer did not withhold enough state taxes for the year.
My wife and I live in Indiana. I lived here all of 2016 and she didn’t move from SC to Indiana until April 2016. She works remotely from home for a company based in SC. Her company only withheld SC taxes for 2016, but we filed our return together and are showing a large refund from Indiana.
This doesn’t seem right and I’m worried Indiana is going to say there was a mistake. We told the accountants when exactly my wife moved. I make about twice what my wife does and my income was taxed all year in Indiana and we filed together, so could that have a positive effect on it?
I told my wife to make sure her company is taking Indiana taxes out in 2017 going forward. I’m assuming that’s the correct thing to do.
There are many reasons for why your Indiana return could have a large refund and we cannot gauge or determine this positive or negative reason without your tax returns. The large refund could be a result of a IN Resident Credit for taxes paid to SC. Please consult with your accountants.