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:
-
resident-state: the state where you live. Your resident state taxes ALL of your income, regardless of what state it’s earned in.
-
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!
We are moving to Nebraska from Indiana and although my husband is looking for work in Nebraska, he was offered the option to work remotely from Nebraska(IT work) for his current company in Indiana. This would involve occasional trips back to Indiana for emergency onsite work. I understand that we pay taxes for state we reside in but if he works occasionally in Indiana how does that work?
Hi Lori,
Technically, your husband could be liable for taxes in states wherever he physically works and the state he resides in. His best bet will be to check with his employer to see how to company handles this situation. It tends to differ among employers and states. For example, certain states hold you liable for income taxes starting the very minute you begin work in that state while others only hold you liable after 2 weeks of working in the state.
I work from home in Florida for a company that is based in New Jersey. My W2 has NJ taxes. When I file my Non Resident return, do I get all of that money back or partial? In the past my Non Resient return was filed by someone else and I only recieved a few dollars back. When I did my return on my own, it made it seem like I should recieve back all of the taxes paid in. Please help!! Thank you.
Hi Lori,
When working remotely, you are only responsible for state taxes where you physically work and physically reside. When filing your non-resident tax return for NJ, you should receive that withheld income back as a refund (unless certain circumstances apply to your situation).
Hello,
I work from home in Seattle, WA and my employer is in Illinois. At the most, I only travel to Illinois 2 to 4 times a year (10 to 20 working days) for work related meetings. Illinois withdraws state taxes from my check. I hear each state has their own laws in terms of withdrawing state income tax for remote employees. Should I be paying Illinois taxes? If so, would I be able to claim or get credit for IL state income tax withheld when I file a non-resident state return?
Thank you.
Hi Daniel,
I suggest speaking with your payroll department as taxpayers are typically credited by their resident state. In your case, you would not be seeing as Washington is income tax-free.
Hello,
I recently moved to Washington State from West Virginia and am working remotely for a company based in West Virginia. I have not registered myself as a resident yet but am planning on doing so asap. I am currently paying state income taxes for West Virginia as I filled out my tax info and withholdings when I was still living in WV. Will I receive a refund for the taxes I am paying to WV as I am living and working remotely in a state that does not have an income tax?
Thanks!
Wes
Hi Wes,
The first thing you should do is update your W-4 information with your employer. You are technically only liable for income-tax in the state where you live and physically work. That being said, you should no longer be responsible for WV tax on your income since you are working remotely for the company. When you file your tax return, you will file a part-year resident tax return for WV and report how many months out of the tax year you lived there as a resident. You will be taxed on that amount and it will adjust accordingly.
Hi,
I work from home in Florida for a company located in NYS, the payroll company is still withholding taxes in NYS so I had to file non-resident tax form to claim these withholdings from NYS in 2015. My question is how do I get my company to stop withholding in NYS so I don’t have income from a different state on my W-2 also removing the necessity to file as non-resident for that state.
Hi Etienne,
The most proactive step to take would be to speak with your employer or payroll department. Unfortunately, some companies will not seize to withhold taxes for the state that they are headquartered in. In this case, you will need to continue to file a non-resident state return for NY each year. This is tedious and seems unnecessary, however, it comes with the remote work territory sometimes.