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:
-
resident-state: the state where you live. Your resident state taxes ALL of your income, regardless of what state it’s earned in.
-
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’m moving to California for a job, and will continue working for a Texas company remotely, as an independent contractor. How will I have to file my taxes ?
If you are becoming a part-year resident in 2017 of CA, you will need to report all of the income that you earn during the period that you become a resident to the end of the year. That income will be subjected to taxes in CA. However, for the next year in 2018, if you are becoming a full-year resident of CA, all of your income will be subjected to taxes that you are earning elsewhere as a non-resident.
I live and work in California. However, the company is based out of Utah and when they process payroll, Utah taxes are withheld but not California taxes. I file single with no dependents and I’m concerned I will owe money next tax season due to California taxes being higher than Utah’s. Will I have to pay both or just the difference? What should I be expecting?
If your company is withholding non-resident income taxes for Utah while you are a CA resident, you will need to file a full-year resident CA and non-resident Utah tax return. This is so that your CA state tax return will have the proper allocated full-year credit so that you will not be double-taxed. You will end up paying the difference.
Hi, I have a question which I tjink i know part of the answer to. I will become a resident of OR soon, but I work for a customer service business headquarter in SC. I started working for this company last year. However I lived in WA and now come to find out they are not licensed in OR. Is it at all possible to keep my working address in WA, which is at my grandmother’s, but still live in OR and pay resident income tax? I was not taxed by the state of SC as this is a remote job.
Your eventual Resident State of OR will tax the income whether your address is in WA or OR (The resident state taxes all income wherever it is earned). If you proceed with keeping the WA address with your employer, no OR taxes will be withheld by your employer. Therefore you will end up with a high tax liability on your OR tax return at the end of the year. How you proceed is up to you and your employer.
I live in Australia and held an online seminar in Philadelphia, PA. Do I need to pay taxes in USA for ticket sales?
Unfortunately, our website does not deal with foreign income, so we cannot provide you with any further advisement. It would be best if you speak with your tax professionals for further information. It may also be best to speak with the company that employed you.
My Residency is in WI and I am employed in WI, I will be working remotely during the winter (Snowbird) Nov-April in AZ and Calif- we have motorhome so we will be staying different places for a month here and there. My employer said they will be taxing me according to AZ rates during that time as I don’t know how long I will be one place or the other. In May, I will return to WI and work at my home again for about 6 months. So will I need to file Non-Residence taxes for both AZ and CA? I won’t even have an address for those months, camping and boondocking along the way. Help!
According to how your employer files your state taxes, the states that are shown on your income statement will help guide you as to whether or not you will need to file a Non-Resident return for either state or both. From the situation, it seems that you will only need to file a Nonresident return with AZ, or even possibly a part-year resident return for both AZ and WI. You will be able to better assess this after you receive your income statements for the tax season.