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!
I live in TN, along with my investments being in TN. If I use a financial advisor that works in Indiana, will I have to pay Indiana state income tax for him to manage my money from his office in Indiana?
You do not have to pay IN taxes on your investment income since you are a Resident of TN and your investments are in TN. Where your money is managed does not determine where it is taxed. It is the source of where the money is earned that determines where it is taxed.
Would you please post the IRS publication(s) from which the details of your article are sourced?
The details of our articles are based on general truisms based on many state publications. Even though each state may have their own set of formalities, every state share commonalities in their filing regulations when it comes to filing a remote income earned tax return
I own a consulting business incorporated in Florida, I am moving to VA. My income is all 1099 so I am responsible for the Federal taxes. I will be traveling back and forth to Florida as situations demand. But how do I handle the State taxes in VA.
Since you are moving to VA and becoming a part-year resident, you will need to determine the days you’ve earned income from Florida as a resident of Florida and the income you earned from Florida as a non-resident while being a part-year resident of VA. Since you have expressed that you own this business, you will need to make this calculation, and separate the income accordingly to the dates you have lived in those states.
i live in ny and worked 2 days in pa and 3 days in ny. my paycheck only showed pa state tax withheld. is this correct.
If your employer did not withhold taxes for your NY income, you may want to contact your payroll or HR department immediately to correct any errors.
I don’t know why tax is soo complicated. So here is my dilemma. I reside in Washington state with no state income tax, but started working for a California-based company from October 2015 to Dec 2015. We relocated to CA in January of 2016. Now we have received a notice we have to pay state Income Franchise tax for the months of October 2015 to Dec 2015 because the money was sourced from a company in California. is this true and accurate? would appreciate a response here. Thanks
State taxes paid, is dependent on the agreement the company has with the state. If the state mandates that taxes be withheld for the income earned from the company that is earning the income in their state, they must do so for all their employees. This means you are earning non-resident income, and will need to report your state taxes as such, if you are still working remotely from WA. Rapidtax is a website you can use to easily file your state returns, and our customer service support is here to assist you throughout the process.
I am sorry to comment under this thread but couldn’t find another way to ask a new question.
We will be moving from Maryland to SC this summer for my husband’s employment. I will continue to work at home for my Maryland employer. (I have always worked off site.) Will state taxes for Maryland and SC be taken out every year or just this year? Will I get a credit for the MD taxes if I haven’t lived/worked there? Will I need to file in both states and then get a refund for the MD taxes?
Your site is very informative and your personal responses are appreciated! Thanks in advance.
Based on your tax situation, you may need to file a part year MD and SC return for 2017. However, for the following years, if you reside for the full year in SC and work remotely for an employer headquartered in MD, then you would only file and pay taxes to SC.