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 moved from Wisconsin to Oregon in September, but work remotely for the same company back in Wisconsin. Do I need to file returns in both states?
Hi Zee,
State taxes are withheld by the state where you physically reside and where you physically work. It can get confusing when you work remotely from a different state than where your company is headquartered. However, states do not tax employees if they are not physically working or living there. In your case, you would need to file a part-year state tax return for both Wisconsin and Oregon. You will be asked to report how much of an income you earned while living/working in Wisconsin and while living/working in Oregon. In future years, you will only need to file a state tax return for Oregon (under the assumption that this is where you will be living and working from for the entirety of the tax year).
Keep in mind that you should speak with your payroll department to ensure that they are now only having Oregon state taxes withheld from your paychecks.
I am a resident of Texas and work remotely for a company in Illinois. I spend a few months visiting family in NY and continue to work remotely during that time. Does that mean I owe NY state income tax for that time period? Would I owe every state I travel to and stay for any extended period of time (visiting family/friends/places but continuing to work remotely) state income tax for each visit?
Hi Michele,
There are two different tax situations to take a look at. The first being that you work remotely from your home in a different state than where the company is physically located. In this case, you are only responsible for taxes in the state where you are a resident and the state where you physically work and earn an income. In your case, that is Texas and they are an income-tax free state.
The second tax situation is that you travel and work from different states. One thing that is important to note is that each state has their own set of guidelines when it comes to working as a non-resident and when you become responsible for taxes there. Some states will consider you liable the very first day you begin working there while others will give a time-frame threshold before you become liable for state taxes. For instance, NY requires that anyone who comes for business must file a nonresident return for income earned from day one. But those travelers’ employers are only required to start withholding New York tax if they work in the state for at least 14 days. The smartest thing to do is to speak with your employer to make sure you’re both on the same page and that you should ultimately follow what is written on your W-2 form.
Hi. I live in Kentucky. I am teaching in Cincinnati, Ohio. My employer withholds KY income tax, however, I am also paying Cincinnati city taxes, even though I do not live in Cincinnati. Should I be getting the paid city taxes back on my return?
Hi Markus,
Seeing as each state has slightly different guidelines when it comes to taxes, I can see where you’re coming from. However, anyone who lives or physically works in Cincinnati is liable for the 2.1% income tax regardless of their age or income amount. You can check out the City of Cincinnati government website for more FAQs that may be beneficial to you.
I will be teaching for an online high school head-quartered in Dubai. I will be teaching from my home in NY state. They are a branch of a US company called K12. I am not sure who will be paying me but they said that I have to save my invoices since they will not be providing W2’s. How do I file my taxes. I also teach full time for a local high school and file those taxes jointly with my husband. Can I file jointly for that and then quarterly formy online work?
Hi Mollie,
To address your last question, you should only file one federal tax return, and one tax return per state involved in your specific tax situation. Even if you have more than one source of income, you are advised to wait until you have all of your income documents for the year before you file a tax return. However, something that you CAN do is file a joint federal tax return with your spouse and separate state tax returns. This will hold you both equally liable for the federal tax return and individually liable for each of your state tax returns.
When it comes to your initial question, the answer is a bit more complicated. You mentioned that you are not sure who you will be getting paid from. If you are getting paid from a US headquartered company, then they should be providing you with some form of income document (ie: W-2, 1099, etc.). Based solely on the information you have provided, it seems as though your employer should withhold NY state taxes. However, I strongly advise you to contact your employer to see how they will be taxing you and if you need to consider Dubai tax laws as well.
I work remotely in Missouri for a Florida based company and will need to file for unemployment, so I file in Missouri or Florida?
Hi Drew,
You should file for unemployment in the state where you reside. In your case, that would be Missouri.