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 am currently a resident of Massachusetts but work part time in Florida which has no state tax. When I file my state tax in MA. will I need to pay taxes on my FloriDA earnings.
Hi Rich,
Although Florida is an income tax free state, you will still be required to report your income and pay federal tax on all of it, regardless of which state it was earned in/from. You will NOT need to pay state taxes on your FL income.
I have a Regional position with a national company that is based in Wisconsin, and I work from home in Ohio the majority of the time. Sometimes I travel to other states for a few days at a time. Will I need to file non-resident forms in every single state in which I work for a few days? This could be very interesting: I’m already up to five or six states right now.This is my first year with this position, so I don’t know how the W-2 will look.
Thank you.
Hi Laura,
I understand your pain as this could get very tedious. When it comes to state taxes and residency, each state has slightly different guidelines. While some states will require you to start paying taxes the day you begin work there, others will allow a 30-day threshold until they hold you liable for taxes. You will be able to easily access this information on the Department of Revenue website for each state that you work in or contact them directly. Although tedious to research this information, it saves you from having to prepare several non-resident state tax returns when it isn’t necessary. Something that you should pay close attention to is that you should file a state return for each state you see listed on your W-2 form once you receive it. Even if you were not responsible for one/some of the states listed, you will be able to file a return and claim that unnecessary money back in the form of a refund.
Hello.
I currently live in New Hampshire and I have a green card residence. I am working remotely for a company in Australia. Do I need to pay taxes? I am new in USA so I am a bit confused what do I need to do.
Thank you so much
Hi Diya,
In the U.S., all foreign income earned is taxable. When you file your tax return for the year, you will be asked how much foreign income you earned (how much was earned from your job in Australia while you were living in the U.S.). If you have not paid tax on that income over the course of the year, you will most likely receive a tax due bill from the IRS. At that point, you will be able to either choose a payment plan or pay them the tax owed.
We live in TX (no state income tax), but my husband works remotely in outside sales for a company in CA. His employer is taking CA taxes out of his paycheck. I understand from your articles that we’ll now have to file a CA tax return. However, since Texas obviously won’t credit us for this (massive) tax paid to CA, where can be deduct this huge expense?
We’re quite confused and ticked off, actually, because he has worked for several other CA companies and they did not deduct CA tax. If we’d known this before, he wouldn’t have taken the job or certainly would have negotiated his pay differently.
Hi Kelly,
Your husband is only responsible for the state taxes where he physically earns and income (Texas) and where he resides (also Texas). In his case, Texas is income-tax free so he will not be subject to tax there. Since his employer withheld taxes from California, he doesn’t need a credit to claim that back. He’ll just need to file a non-resident CA state tax return. However he decides to file, whether it be with Rapidtax.com, an accountant, etc., he will be asked how much income he earned in/from California. He will simply say that he earned $0 along with the amount that was withheld. This will exempt him from CA taxes and show that he shouldn’t have had taxes withheld from his income. He will receive it back in the form of a refund.
Thanks you so much for your reply! The situation has been weighing on us both. I really appreciate your taking the time to help alleviate some of that stress for us!!
I have my permanent residency in Texas and my employer is in Texas. I am planning on working remotely (Oregon initially) for 4 or 5 months out of the year with the remaining months working back in Texas. I am a little confused as to what we need to do from a tax perspective and what is required from my company in this situation.
Hi Paula,
In most cases, you will be responsible for taxes in the state where you physically are earning an income and the state where you reside. This plays out the same for working remotely. Texas is an income tax free state but Oregon is not. Since you will be physically working and earning an income in Oregon, you are liable for taxes there. Your employer should be withholding Oregon taxes from your paychecks for the duration that you are working from there. If not, you will still need to file an Oregon state tax return and report the income you earned while living there.