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;
- New Hampshire
- South Dakota
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!
407 Replies to “If You Work Remotely Where Do You Pay Taxes?”
My Texas based company will only allow employees to work from home if they move out of the Austin area where are offices are located. They are also telling me that I can only work in states where there are no state income tax. Can you tell me why that is? Thanks so much!
My family is moving to Morocco. My wife has accepted a job teaching at the American school in Casablanca, Morocco. I will get Moroccan residency as her dependent.
I am a software engineer and my US employer would like to continue to employee me remotely; however; they don’t want to employee me as a direct employee. They suggested I start a LCC. Is a LCC my best option?
We don’t own property in the US. I am currently using my mother’s address in Florida as a permanent address. We are US citizens. We plan to stay in Morocco for at least seven years until our children graduate from high school.
I live in FL and work remote. I moved here 8 yrs ago from NJ. I just noticed that my employer was still deducting the NJ SUI/DI tax. they have committed to reimbursing me for this year they state they cannot for all prior years due to a statute of limitations. is this correct? its a couple thousand dollars total for all years. or should I request from the state of NJ?
I relocated from NY 12/29/2017 and currently living in Georgia where I work from home remotely. I employers are taking out NY state taxes at the moment. I asked my employer to change it to Georgia withholding, but they stated their payroll company is having issues with the change. Therefore, it’s still set for NYS. from your article it appears that I should only be paying Georgia withholdings. What should I do in this situation?
I live in New York
My Employer is in New Jersey
My client is in Indiana
I work from home and never went to Indiana or NJ for work
Which state I pay my taxes in? I am a NY resident.
On my W2 it says same amount in the box of state ear ings for both NY and Indiana.
Both states withheld taxes.
Not sure what is happening 🙁