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!
Hello,
I been working remotely in FL for about 1 year now.
I have been a 1099 until this month
My employer is in MA, I received my first check as a W2 and I see a MA tax deduction for $87.
I called the payroll company and they said that because my employer is in MA, he has to report it and the deduction will happen
Is there a way someone can confirm that please?
My husband also works remotely from FL and his employer is in MA and he doesn’t get charged MA taxes
I’m so confused.
Thanks
Every company has their own regulations and set up with the state, you will need to file and pay taxes to a state with the agreement that your company has with MA. It seems that they are mandated by the state of MA to withhold taxes for income that their employees earn, and your husband’s company is not. Unfortunately there is nothing further you can do, it is mainly dependent on your employer.
Hi there,
I am thinking of starting employment in a Chicago based non-for-profit organization but working remotely out of my home here in Westlake, Ohio. I am trying to work out where and how much tax I would end up paying on approx. $115,000. Any assistance would be grately appreciated.
Kind regards,
Which state you would file depends on how you are paid. If you receive a W-2 statement that shows IL in Boxes 15-20, then you would prepare a Non-Resident IL return and a Resident OH return. If your W-2 shows OH in Boxes 15-20, then you would only need to file a Resident OH return. If you are paid as a contractor via 1099-MISC, then you would only need to file a Resident OH return since your income is earned while in OH. How much tax you pay you may estimate using the specific state’s tax tables. Thank you.
Currently I live in NY hubby is self employed here. We want to move out of the state. I want to start an online business but want to set it up in another state (Missouri) We want to move to Missouri in the future which is why I want to set it up as there. Also he has a sales tax id and we file sales tax here for his biz,..would I have to do the same in NY?
You would most likely have to file in MO the same way you would in NY but the methods could vary from state to state. Please contact Missouri for details.
Greetings,
I have a strange situation. I am a medical transcriptionist and I work remotely. I have done this work for 15 years and this is the first time this has happened.
I live in Virginia. I recently switched jobs (in October 2016) and I now work for a company located in Albany, New York. When I got my W2, there were no Virginia state taxes withheld, but there were New York state taxes withheld. This was a minimal amount, only $86.10, but it was only for the months of November and December 2016.
I took my information to my tax preparer and I only got back $34 of the $86 that was taken out for the state of New York. Why do I have to pay $52.10 to the state of New York when I do not live there or physically work there? I also have to pay Virginia taxes on top of this. This was a minimal amount for only 2 months, but this could really add up in a year’s time.
I am not quite sure what I need to do. Can you please advise?
Thank you.
If your payroll department has decided to have your income taxed within the jurisdiction of New York while you were a full-year resident of Virginia, your state returns would be a full-year resident with VA and a non-resident state tax form with NY. New York has the right to tax any and all income earned within their state if you are earning income there as a non-resident. However for your full-year resident form you can also have a non-refundable resident credit allocated to your full-year return in order to reduce or satisfy the tax due for Virginia for taxes paid to New York. Rapidtax can help you with filing your state tax forms, and our customer support team is available to assist you through the process.
Hi I need some advice/assistance
In July 2016 I moved from Florida to NJ. My employer is still in Florida and I work remotely in NJ. When I made the move, our payroll company mistakenly didn’t withhold NJ taxes for the remainder of the year. I am now trying to file my taxes but having difficulty. We do not conduct business in NJ I am the only payroll employee here. I am trying to pay my NJ state taxes from July – Dec but it is not letting me in H&R Block. Any help?
Going off of your income statement, you would be filing state returns specifically for the states that are indicated within the form. If there are no states indicated on your form, there is no taxable income that you would need to report earned to the state. However you may want to speak with your department to have this adjusted if you plan to reside in New Jersey for the full year.