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 own a home in suburban Maryland. It has been and continues to be my primary mailing address (20 years).
I am considering renting an apartment in DC where I work. I expect to stay in that residence 3 nights a week for ~ 40 weeks a year or 120 nights.
I do not expect to change my mailing address. Do I need to file taxes in DC?
You will be able to continue to file with the state of Maryland for your income earned in the District of Columbia, according to the Comptroller of Maryland
question concering being a non us citizen and working for a US comapny that only is online. Examples, airbnb and uber. the transactions are from online. Would this person get a 1099 misc? or what do companies give out when the person is from another company and how to the company record this to the IRS? i am doing some research for my marketing class.
According to the IRS, you may not be subjected to taxes from the US if you are considered a non-resident alien.
hi. We live and work in CA. We are thinking about moving to Utah but my husband would commute to California Monday-Thursday. How would we deal with the taxes?
If your spouse will be residing in UT as their domicile state but traveling to CA for work, they may be subjected to taxes in Utah for the income that they earn in CA. The income that they earn in CA will still be taxed in the respective state, however, when it comes time to file your state returns, you can file a non-resident California return and a full-year resident Utah return. This will allow you to allocate a non-refundable credit for taxes paid to another state from CA to your UT return.
I have a printing company in NY and one of my employees moved to NC for their own reasons to be near family. The job performed could be done in NY but it is ridiculous to expect the employee to return to NY when all her work can be done on the computer. Should I withhold NY or NC taxes from her paycheck and if NC then will I also have to file for sales tax for my NC customers as well?
For convenience for the employee, it’s always best for the employer to withhold taxes from the state that they are remoting from. However, there are tax rules and regulations, which you may need to consult a local CPA for further advisement on these matters. Even though you are withholding New York taxes for your employee, they will still be able to file a non-resident New York return and a full year resident return in North Carolina. They will be able to allocate a non-refundable credit to their NC state return for taxes paid to NY.
For the sales taxes for NC customers, consulting with a local CPA would be for the best.
I live and work remotely in NH my company is based in MA they take state MA income taxes out Can i get these refunded when i file?
Even though you are working remotely from NH, the income that you earn, depending on your employer, can be subjected to the State taxes where this income is earned in. If you had any excessive income withheld in the State of MA for taxes paid, the State will refund you the excess amount.
I am in a similar situation. I have asked the same question in various forums but the answer seems to be always indirect. I lives in IN and work remotely for an MO company which withholds MO tax. This is what I plan to do: File IN resident return with all my income. File nonresident MO return with 0% tax liability since I have not set foot in MO at all for 2017. This way I will get all MO withholding back.
Anyone, feel free to comment.