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!
If I am an Arizona resident, and US citizen, working from my Arizona home for a company in Israel, how/where do i pay my taxes?
Hi Lori,
Since you will be physically earning an income and residing in Arizona, then you will still be liable for Arizona income state taxes. You will need to report your foreign income earned on your US tax return(s). I would advise that you check with your employer in Israel to confirm how to proceed in paying taxes there. Keep in mind that although you are paying taxes to the US, you may also be responsible for Israel taxes.
hi
my husband works as a contractor remotely from Ohio, we rent an apartment in Ohio. But his client is based on Mt.Laurel, New Jersey. So his employer suggested the taxes should be withheld from both NJ as well as Ohio. So now should we file tax for both state if his W2 reflects both state. In this case will we get some return from the Ohio. Or Should we ask his employer to withheld tax only from Ohio. Is this correct?
Hi Akila,
As a basic rule, you are responsible for state taxes where you reside and where you physically earn an income. In your husband’s case described above, he is responsible for Ohio state taxes since he is living there and earning an income there. Keep in mind that if he travels to New Jersey to work directly with his client, that is when he could be responsible for New Jersey tax as well. He could speak with his employer about not withholding NJ tax or he could simply file a non-resident NJ state tax return along with his federal and OH resident tax return. He will then be issued a refund to compensate the unnecessary tax paid to NJ.
Good Afternoon,
I am a resident of Long Island, I am thinking of a taking a position with the main office in Georgia but I will be working remotely from my home with there office in Florida,
Does that mean I pay NY State, City and Federal along with Georgia’s Federal, State and City and Florida’s City and Federal
HELP.
Am I working for taxes???
Hi Phyllis,
You are responsible for state taxes in the state that you physically reside and the state where you physically earn an income (unless that state is income tax-free). Based on your situation described above, you will not be physically working/earning an income or living in Georgia or Florida. You will be responsible for New York taxes. That being said, if you notice that your employer is withholding taxes for any other state besides New York, you will need to file a non-resident state tax return along with your NY state resident tax return and your federal tax return. You will then be issued a refund to cover those taxes that you had withheld for the non-resident state.
Please note also that Florida is an income tax-free state so you will not have any taxes withheld from Florida.
If I live in Texas (no state income tax) and work remotely from home for a company in Maryland (state income tax), will I be required to file a MD nonresident return? Will Maryland state income tax be withheld?
Hi Dave,
As long as you are physically earning your income in Texas and residing in Texas, you are not responsible for Maryland state tax. Keep in mind that if you travel to Maryland and conduct business there, you are then responsible for MD state for the duration of your stay there. To determine if your employer is withholding MD state tax from your paychecks, take a look at your pay statements (it will also be present on your W-2 issued to you at the end of the year). If so, you should file a non-resident MD tax return along with your federal tax return. This will ensure that you are issued a refund for the unnecessary MD taxes that were withheld throughout the year.
My husband works from home in Illinois. He recently started working for a company based in California, I noticed on his paycheck they are taking out California taxes both state and federal. Is this correct?
Hi Stacy,
If your husband is working remotely, he should not have CA taxes withheld just because the company is based there. Taxes should be withheld from Illinois. That being said, he should speak with his employer or payroll department as soon as possible. It could have easily been a mistake on their part. When it comes time to file his taxes, he will want to file a non-resident CA state tax return to claim those taxes withheld back.