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. If I worked remotely from my home in Nevada as an independent contractor for a company based in California, would I be subject to California state taxes (non-resident)? From what I’ve read above, it appears that it’s based on how the company in California files, and I could reference a W2 for further information on how to proceed. However, I’ve received at 1099-Misc, not a W-2 from the company. My 1099-Misc had none of the state or federal boxes filled in. Are there different rules/allowances for 1099 non-resident workers? Also, how do we determine what the proper tax rate is? I’ve received a tax bill from the FTB for a random amount, and I don’t know how they’ve derived their figures. Thank you in advance for your guidance.
It seems that your employer may have reported your earnings in CA to the Revenue and Taxation Department of Finances in California. Since you have been billed by the FTB, it’s in your best interest to file a state return with CA. Any and all income that you earn as a non-resident is subjected to taxes within the state that you have earned it in. However, if you are a resident of a state, all income will be subjected to taxation regardless of where it was earned.
Thanks for the insight and guidance, Robert. I appreciate you!
I just accepted a job from a company that is headquartered in NJ. I will be working remotely from my residence in MD.
Will I owe taxes to both states? Which state should I request my employer to withhold taxes for?
Typically any income that you earn in another state is subjected to taxes as a non-resident. Your residential state, however, will tax any and all income earned, regardless of sources or state boundaries. The information will be shown on your income statements when you receive them and give you a clearer indication as to which states you must file a state form for. You can, however, discuss your options with your employer.
My question is as follows: I currently live in Florida but plan to move to NYC. I sell areal Estate so many of my deals will not close until well into 2018. They went under contract recently July 2017. Will I have to pay taxes to NY and NYC on the remaining commissions I receive from Florida?
Hello Chad,
If you move to New York and lived in New York for less than 12 months then you will be considered a Part-Year Resident. During this time, if you received income from Florida, you will not be taxed on income earned in Florida unless New York is your Resident state. Resident states tax all income.
I live in Texas and my husband recently took a job in Illinois and is living there. I have started a business and am beginning to see a profit. If we file jointly, will Illinois attempt to collect state income tax on my business earnings since it will be reported from a Schedule C. Should we file separately?
Hello Beth,
Since there is no state tax in Texas, you will not file a Texas state return. However, Illinois will tax your Spouse’s income. It is entirely up to you to choose a married filing separately or married filing jointly filing status. A married filing jointly filing status requires both parties to share any debt/tax liability and you will have a greater standard deduction as opposed to married filing separately.
Hello. I live and work from home outside of Philadelphia. I will be working under a 1099 for a company based in Philadelphia but will still be working from home. Do you know if I will need to pay the Philly wage tax?
Thanks for any advice.
Generally, if you live in one state and work remotely in another, then you would only file and pay taxes to your resident state.