If You Work Remotely Where Do You Pay Taxes?

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;

  1. Alaska
  2. Florida
  3. Nevada
  4. New Hampshire
  5. South Dakota
  6. Tennessee
  7. Texas
  8. Washington
  9. 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 you work remotely for your employer, file your taxes with RapidTax to avoid a headache.

407 Replies to “If You Work Remotely Where Do You Pay Taxes?”

  1. Hello,

    I am currently working for a company in NYC, I am moving to south dakota for personal reasons but will continue to work remotely (for convenience) for my employer based in NYC. I assume that means I will be liable for all taxes in NY state, NY City and federal?


  2. What is the situation if I am Canadian working remotely for an American company?
    The company is located in NC and my residence is in Ontario, Canada.


    1. Hi John,

      Based on the information you have provided, you will most likely need to file a 1040 NR (non-resident) reporting your US income along with a Canadian return reporting your US income and any Canada income you are earning.

  3. Hi,
    I am working remotely from my home in Seattle,WA for an employer in California. Since there is no state tax for WA but i am paying income tax for CA as my employer is based there. I have never lived in CA. So how does this affect my returns? Will i get any credit since i am a non-resident for CA.?


    1. Hi Ace,

      That is correct. Since you are not a resident of CA or working and physically earning an income there, you will file a California non-resident state tax return along with your federal tax return. This allows you to claim back the tax you ended up paying for California from your paychecks.

      1. In this situation would you get all they money back? I have same situation. I work from home in south Dakota (where there is not state tax) but the company I work for is located in Nebraska. When I file a non-resident return would I get all or part of that money back that was taken out for Nebraska state taxes?

    2. Hi, I am in a little bit different situation. We were there in IL up until end of June 2015 and then moved to Texas and working from home office. My employer continued paying IL taxes from my paycheck for the whole year in 2015 (and still continue in 2016). My W2 shows IL in item#15 and respective taxes. Two questions for you.

      1. Will we get tax refund to IL that we paid from July’15-Dec15 once we will file IL tax return (part time resident)
      2. Does this seem correct to you that my pay check in January 2016 still shows IL taxes?

      1. Hi Gaurav,

        This can happen sometimes when employers do not update your records on their end. When you file a part-year IL state tax return, you will be asked to provide the time frame you lived in IL. Once you do this, your taxes will adjust accordingly. Although this will update your information with the state and the IRS, it does not mean that your company will have updated your records. Make sure to speak with your employer as well. They should have your new address on file and an updated W-4 as well.

  4. I recently moved to AZ. I currently work for a company that is in Texas. I was trying to see if the company is taking out a different amount since I live now in a different city. Should I have to pay state taxes here? And should I expect my employer to pay me based on TX rules or AZ rules?

    1. Hi Karen,

      As addressed in the article, it does not matter where your company is headquartered. You are responsible for taxes in the state where you are a primary resident and the state where you are physically there and earning an income. In this case, that state would be Arizona. Since Texas is an income tax-free state, you were not having taxes withheld prior to moving to AZ. Now that you live in an income taxed state, you are responsible for taxes there.

  5. Hi!

    I live in California and the company I work for is located in New York. I also might be moving to different states/countries and working from there temporarily. I am given a choice of being on W2 or 1099. Could you please explain what the PRO’s and CON’s of each approach are in this case?

    1. Hi Anna,

      Employers tend to ask this question (usually) hoping that the employee will choose to receive a 1099. The main difference is that with a W-2 form, one is considered to be an employee and with a 1099, one is considered to be an independent contractor. If you receive a 1099 at the end of the year, that means that you received un-taxed income from your employer throughout the financial year. However, you are still responsible for reporting that income and paying the income tax due to the IRS. You will also be subject to an additional self-employment tax. If you choose to receive a W-2 form, you will be asked to complete a W-4 at the start of employment. This will determine the amount of tax that will be withheld from your paychecks throughout the financial year. The amount withheld will be used to cover the tax owed to the IRS.

      All in all, receiving a 1099 is tempting since you are not taxed throughout the year. However, speaking long term, it may not be the best decision since you are still responsible for the income tax owed to the IRS after filing. Receiving a W-2 form may seem more limiting, however, it regulates your paychecks so that you are not subjected to paying the IRS a large lump sum come tax time.

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