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 worked for a WI company for all of 2017 but moved to WA in October where I continued to work remotely for the WI company. I didn’t bother updating my address with our outside accountant that processes payroll because I assumed I would still have to pay WI state tax because I worked for a WI company. I’m now realizing that I should not have been paying WI state tax since I moved and actually shouldn’t have any state withholding at all because WA doesn’t have income tax. So my question is, when I file 2017 taxes in WI will I be eligible for a reimbursement for all the WI state tax I paid since I moved? Or is it just lost money because I messed up and didn’t notify payroll when I moved? Thanks for your help!
You would need to notify your payroll department of the change in order for them to properly allocate and report your income to the specific states. Please consult with them for further advisement on your situation.
I live in Michigan and have been working remotely for a college in New York state for the past several years. From that NY source of income, I receive a 1099 misc with no withholding. Using TurboTax or HR Block, I have been paying a state taxes to New York with a non-resident return, which have in turn cancelled out my Michigan taxes. I thought I was filing correctly, but now reading this thread, I’m now concerned. Should I not have been filing in New York? Am I going to get a big bill for back taxes from Michigan?
Thank you!!
Hello Andy,
Traditionally, you filed correctly. However, given your remote situation, your question would be best answered by Michigan.
Hi, I have a question regarding 2015 tax year. I am a lawful resident of USA working on a work visa.
I worked and stayed in Connecticut for first half of the year until May 2015. Then I moved out of USA, earned and lived in my home country. Then I moved to USA on 15th dec 2015 to Georgia state. I earned and lived in Georgia for the remaining 15 days in 2015. My w2 had both GA and CT taxes withheld for respective pays.
The tax filing agency said I have receive tax refund from Connecticut and pay tax bill to Georgia. Did I do the right thing? Should I be paying tax to Georgia for the income I earned in Connecticut? Please advise.
I moved to VA and work from home remotely for a company in NC who is taking taxes out but they said I could mark the exampt box and then they would not take out state taxes. Not sure what is best thing to do…..my question is after I file my non resident for NC and pay my NC taxes will VA give me the fULL credit dollar for dollar for what I paid to NC? Also I am married and my husband’s company I’d here in VA so would I file a joint VA state tax with him or do I have to file dtate and federal separately? Please help soooo confused!
Filing jointly will give you a bigger refund or a lower income tax liability. When you file separately, your tax rate is higher and you won’t be able to claim certain credits.
However, with joint filing, you have shared income tax responsibilities.
Once you file your Non-resident NC return, you will be able to receive a credit from VA for taxes paid to NC.
Hello,
From Jan 1st I was relocated from Glendale,Arizona to Richmond,VA for my work .But moved physically on Jan 24.So how would I file my state tax,considering that in my payslip all the tax deducted where for VA and nothing for AZ.
Thanks
You can file as a Part-year resident of AZ and VA since you resided in each state for part of the year.