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!
In Arkansas, you pay Arkansas state income tax on all amounts earned while residing in Arkansas, or amounts earned _from Arkansas sources_ while residing outside of Arkansas. There used to be exceptions for amounts on which you were taxed by your state of residence, but it’s been awhile since I looked into those rules.
California does something similar – but they even require taxes be withheld on amounts earned while working in the state (but not residing there) even if the payee is in a different state. As an example, I traveled there to perform a week of training at a client company, and the client company paid California state income tax on the amounts I earned – even though the company for which I was working was based in my state of residence.
When you are earning income from another states yet do not reside there and you have paid taxes, what you are looking for is a credit to be allocated to you full year resident tax return to prevent double taxation. All non-resident states have the right to tax any income earned within their jurisdiction, and your full year resident state has the right to tax all income earned regardless of where it was earned from. In the end you are looking to receive that non-refundable resident credit to avoid your resident state from taxing you on taxes paid to non-resident states.
Hello, I have a question about withholding state taxes for a remote employee. We are located in Wisconsin, but we have a remote employee who resides in Georgia. He requests that we withhold Georgia state income tax (SIT) for him. However, we are concerned that if we process the Georgia SIT, we may incur corporate tax. As such, we do not want to apply for a Georgia account. Which state’s income tax should we withhold, or none? Any advice would be greatly appreciated.
Unfortunately we cannot advise you on how you should withhold your state taxes for your employees. It may be best for you to consult with state offices, for further advisement or information pertaining to this situation.
Hi
So I live in New York city (NY) working remotely for a company in New Jersery (NJ). For 5-6 months of the year I live and work remotely abroad but they pay me in NYC, do I pay full resident New York State taxes or do I pay part time resident state taxes or how does it work? They don’t do anything different with my earnings when I’m abroad.(not sure if that matters)
If your company has chosen to withhold state taxes in NYC for your income that you earned remotely in NJ, all you will need to file is full year resident. If it has any other state information within the income statement, you may need to file differently.
By making an account with us, we will be able to better assist you further along with your taxes then through correspondences through these comments. It will allow us to see an in depth view of your records that you would like to file, and we will be able to offer you better assistance.
Hi
I currently work in Massachusetts, am moving to Florida, and will be working remotely.
I was told that my company will be withholding Mass state tax throughout the year.
When it comes time to file my tax return, I’ll be filing a Mass non resident return.
The state of Florida has no state income tax.
Will I somehow be receiving a refund for the taxes I paid to the state of Mass, because I live in a non taxable state?
Although, you are a resident of a tax-free state (FL), and have worked in a taxing state (MA), you still have to pay taxes to the state where you worked (MA). Unless you are working in a reciprocal state, you will have to pay taxes to the state where you earned your income. You would file a nonresident return to pay these taxes. Rapid tax simplifies the preparation of Non-resident returns. Click here to get started today.
My son is a Florida resident. In 2016 he had 2 part time jobs while he was a student: He worked in Orlando 3 days a week at a finance company and he works remotely for a NY based company creating spreadsheets a couple of days a week. The W2 for the FL company has no information in boxes 15, 16, and 17. His W2 for the NY based company shows information in boxes 15, 16, and 17, so does this mean he has to file a non resident NYS tax return? We attempted to do this and the efile system is automatically calculating the NYS tax amount on his entire earnings (FL and NY), not just the NYS portion.
Why is this and what should we be doing differently (other than mailing in a paper copy)?
Thanks
For the income that was earned in Florida, the earnings should be completely exempt from state taxes. However specifically with your NYS earnings, they are subjected to a non-resident state tax. You will need to be filing this as a non-resident keeping in mind that what you’re entering in boxes 15-20 is accurate. That way the system can determine exactly, which earnings to allocate to which state so that only the income earned in NYS is taxed on your non-resident NYS tax forms. If you have an account with us, and have already submitted, we will be able to further assist you on the nature of your state tax return forms. You can contact us by phone at (877) 289-7580 during our hours of business Monday-Friday, 10am-5pm EST. (excluding holidays) or through our live chat support.