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,
I live in NH, but work in Mass. However, I recently started working from my NH home 4 days a week with 1 day a week in Mass. How do I file my taxes when it comes to my time working in the office vs working from home? Do I just add up the income I made during the year working in Mass and not in NH and file that number or is there a different step I am unaware of? Thanks for the help.
I advise you prepare a NH resident return and a MA non-resident return. Rapidtax expertly handles such returns. Click here to get started today.
Hi,
I love and work full time in Hawaii, but I am going to start telecommuting for a second part time job in Washington. Do I need to file taxes for both states, or just Hawaii?
Thank you!
If you are telecommuting for work in the State of WA, you will only need to file a State return with your resident state. Washington does not have taxes imposed on the income earned within the State.
Hello,
Please advise-I live in Utah but am working part time remotely for a company based in Florida. What do I need to do to have Utah state tax withheld from my earnings?
Since FL is a no-tax state, will I be required to file taxes in FL?
Thank you
As FL has no taxes on income earned within the State, you are not required to file a return with FL. However, for which State your company chooses to have your taxes withheld in, will need to be discussed with them. It’s best to speak with your payroll on a request to have your taxes withheld in Utah if there is an option for this.
Hi, I am an Indian citizen and have recently been authorized to work in US on an L1A Visa. Our Headquarters in US, is based out of Woodbridge, NJ, but I will be working from Dallas, Texas. As Texas is an Income Tax free state, I understand, I would not have to pay any income related tax there. Would I have to pay any taxes in NJ State, even without living there?
Regards,
Durga Prasad
The income that you earn is based on where you will be making it from. So if you are present in the State of Texas, as you are making the income, your income is subjected to taxes in that specific state. As you had expressed Texas is a tax-free State, so a State tax return is not necessary for filing.
Hi,
I am currently employed in TX but looking to relocate to CA after getting engaged to a woman out that way. I am able to work remotely, but my employer does not want to deal with the CA tax laws.
If I were to get the company write up a 1099 paid to my LLC (based in Texas), and I got an annual W-2 as an employee of my LLC, would I be able to take full responsibility for the CA tax situation? Based on your article I would still be subject to CA income taxes, but if I would think that my LLC would be responsible for compliance with CA tax law as my employer, and the company contracting me for my services would not need to involve themselves. Is this correct?
The payroll tax is put in place for an ease of convenience so that enough of your income gets withheld in hopes that you won’t have to face a large tax bill when it comes time to file.
Your employer can still handle your W-2, however, you won’t have any of your income withheld for CA for your TX company. You will need to ensure that you have enough funds at the end of the year to pay the CA State taxes, or you can choose to make quarterly payments to CA, which you will be able to report on your return for credit.