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!
Hi,
I just moved from CO to SD, I work remotely from home in South Dakota. My company says they have to tax me CO state income tax because they do not have a location in SD and have not opened up taxation. They are located in 46 states, I am the only employee in SD.
Now they are taxing me again for CO, my question is how do I file my taxes? Can I recoup and of the CO Tax dollars? SD has not state income tax.
Hello Renee,
Because you are earning income from CO sources, you have to pay CO taxes on that income even if you are not a resident of CO.
Colorado Dept of Revenue: Non-Residents
I live in san diego,ca and am working for a company Head quartered in arizona. My job is mostly travelling all across USA and overseas. Should i be filing for non-resident tax? How should i file my taxes given my case. thanks.
You would have to file a Resident Return for the state that you live in (CA), and a Non-Resident Return for every other state your employer withheld taxes for (Boxes 15-20 of your W-2 Statement).
I live in AZ and work remotely for a company based in OH. My employer withholds OH income taxes instead of AZ and refuses to take out AZ income taxes saying it is too expensive to set up another state withholding for just 1 person. I do not travel to OH to do any work. Every year I must file an OH nonresident return then file an AZ resident return. I wan to increase my OH withholding allowances to more than the number of my Federal allowances. Even though OH has a separate withholding form, my employer insists the Federal and OH withholding exemptions must be the same number. Is this true? Having to pay double state taxes every year (OH from paycheck, AZ estimated to avoid penalties) is expensive.
Please contact Ohio Department Of Taxation for answer about whether the state’s W-4 has to match the federal W-4.
It is completely normal for an employer to withhold taxes from where they operate (and not from where you live or work remotely). Furthermore, you should not be double taxed by AZ. When you file a Resident Return (AZ), you should be receiving a Resident Credit for taxes paid to the Non-Resident State (OH) to offset the double tax. Thank you.
Hello! I just got a new job working remote! I reside in MD and my job is based in VA. Now I understand MD and VA are reciprocity states and I did file a VA-4 form for exemptions from VA withholdings but my employer is telling me that I am not exempt and that they will deduct VA taxes. Is this True? Is this a decision thr comoany makes- whether or not they will be willing to deduct MD taxes even with the proper forms submitted?(ie VA4 form)
She tells me to meet with an accountant. Does this mean I will have to file with MD and VA? So basically I am paying twice the amount of taxes? Would actually commuting be more beneficial monetarily in regards to tax returns? Will I have to pay more to MD at the end of the year even if the VA taxes are refunded? Please help!!!!
Your employer does not seem to be following state policies. However, to correctly file your returns based on how your employer is reporting your income, you would have to file a Resident MD and a Non-Resident VA return. Don’t worry, to avoid double taxation, you should receive a Credit on your Resident MD return for taxes paid to VA.
Thanks! Spoke with her today. Apparently the company I work for doesn’t have a tax account with MD, only VA. Does thay sound right? So she said she will try to work on it for thr new year od 2018. I will definitely have to do my research and see if the money refunded from VA taxes will cover what I will have to pay MD
I am so happy to see this blog. I have lived and worked from my home as a sales rep in Vancouver WA with occasional travel to Oregon to see customers ( maybe a total of 20 hours a month). For 12 years now and worked for 2 large companies I have never had to pay Oregon state income tax- I just started at a new large ( huge) pharma company and on my first check yesterday they took out Oregon state income tax!?!!!. Payroll said that because my territory shows Oregon that I have to pay oregon state income tax!? In the last 2 weeks I spent zero days in Oregon and have just had home study in Washington state. This makes zero sense to me . What can I do? — thanks in advance for your quick reply.
Hello,
It is normal to pay state taxes to the state in which your employer considers its home state, in which case it is possible your employer’s home state is OR. And usually if you work in a state other than your own, you would file a Non-Resident Return for the state you are employed in. However, it sounds like they can assign you to a “territory” other than Oregon. Please inquire with your payroll department to fix this if they offer other territories. Thank you.