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 am a US citizen employed by a US company. I recently followed my French wife to France and am working remotely from home on US based projects. My employer is a multi-national company with an Op-Co in France, which I visit periodically. However there is no protocol for my situation and they cannot provide information whether my situation would trigger foreign corporate taxes. On a personal note, the concern is related to my US taxes and French taxes.
If I reside in France and work for a US co. on a normal “at-will” employment (i.e. not a contract employee), with a US tax address and have my normal taxes removed from pay – does it really have an impact on my US personal taxes?
Also, when I pay my french personal taxes – can I use this as a credit/deduction on my US Federal taxes?
Since you are a US citizen, even if you are residing outside the US, you are subject to U.S. federal income tax and reporting on your global income. This includes income paid to you as compensation from a foreign company. Citizens living and/or working abroad must annually report all of their income to the IRS, whether the income is from U.S. sources or foreign sources and whether or not the income is taxed or reported in the new country of residence.
However, the US has provisions that prevent double taxation. Such provisions include the foreign earned income exclusion, foreign housing exclusion, and the foreign tax credit. These provisions can reduce or eliminate the U.S. federal income tax that would otherwise be due by you. Keep in mind, that even if no U.S. tax is owed, a U.S. tax return still must be filed in order to benefit from these provisions. Failure to do so can result in severe penalties.
Thanks for the quick response!
My current employer is in VA and only has operations in VA and NC. I plan to move to CA and work 30 hours per week part-time remote from my residence. Are there any requirements for my employer with CA to allow this? I will be the only employee working in CA to perform services only related to the VA operations.
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.
Hello,
I recently moved to New Hampshire and I work remotely. My company (based in Massachusetts) asked me to come in once a month. The great thing about New Hampshire is you don’t pay state income tax. If I’m working in Massachusetts one day a month do I have to pay state income tax only for those days I work there? I was hoping not to have to go there so I can keep that income that would generally be taxed if I worked in Massachusetts.
Since you are working in MA, you may be required to file a non-resident return. It is best to check with the State authority of MA to determine if you are required to file a Nonresident return. If you are, expertly prepares non-resident return.
Hi,
I am a U.S. Citizen born and raised. I work for a California company remotely. Because I work online, I recently moved to Ireland (I have dual US/Irish citizenship). I’ve been continuing to pay Federal US and California income tax, (it’s taken out of my paycheck) but wondering if this is now wrong?? What do I need to tell my employer? Am I technically allowed to do this?? Should I be paying No Fed or CA tax and just paying tax in Ireland?
For the state of California, any and all income that you earn within this state will be taxed by California, even though you are a remote worker. Because you are a dual citizen, your income is subjected to Federal tax as well. You will have to pay both Federal and Ireland taxes.
I am a retired Texas teacher. I also teach online for a school in Louisiana. We are going to be selling our house in Texas and buying an RV and traveling the country. We will be keeping our residency in Texas. We don’t have a state income tax in Texas. Are states we visit as we travel the US going to expect us to pay income tax even though I am just visiting but will be still teaching online? How would they know?
You will need to discuss this with your employer as this will be dependent on which states your employer will be filing your taxes to. All of the income that you earn will be subjected to taxes depending on what your end of the year income statement shows. If you are a W-2 employee, this information will be in box 15 and will guide you to which states you will need to file for.