Working remotely taxes can be confusing, especially if you live in one state and work for a company located in another state.
For most, working remotely from home is much more convenient than commuting to a job. There’s no train rides, sitting in traffic or obnoxious co-workers to sit next to.
However, trading in your commute to the office for working from the comfort of your own home can come with a price, especially when it comes to filing taxes.
If you work remotely for a company that’s located in a different state than your resident state, you may be forced to file multiple state tax returns. Sound confusing? We’re here to help!
Tax-Free States
If you work remotely for a company in another state than where you live, you may forced to file both a resident tax return and a non-resident return.
However, some states are income tax-free, meaning you’re off the hook from filing state taxes. The 9 states without an income tax are as follows;
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
File a Return to Each States Listed on Your W-2
If both the state you live in and the state your company is located in falls within the list above of income-tax-free states, then you won’t need to file any state tax returns. Lucky you!
However, chances are the company you work for and/or your home is located in a state with income taxes. In this case you will have to file at the least, a resident tax return.
You may also be required to file a non-resident state tax return in addition to your resident state return.
Here’s how to know how many state returns you’ll need to file;
- look at your W-2 Form (that form you receive at the end of the year from your employer)
- the states which taxes were withheld for will be listed
- you’ll have to file a non-resident return to any state listed that’s not your resident state
- no matter what, you’ll file a resident return to the state you live in and report ALL earnings you received over the year, regardless of how/ where they were earned
If you’re working remotely, ideally you should only have to file a resident tax return to the state you live in, but this is not always the case.
Here’s an example- you work remotely from your home in Georgia for a company located in New York. When you receive your W-2 form, you notice both NY & GA taxes were withheld. In this case, you would file a resident return to GA and report all of your earnings from all state sources as well as filing a non-resident return to NY. You’ll only report income you earned from NY sources (so the NY company you work remotely for), on your non-resident NY return.
If you end up being double-taxed, your resident state should give you a credit for the taxes paid to the non-resident state.
If the situation is altered and say, there’s no reference to New York withholdings, you would not have to file a New York non-resident tax return. You would only need to report all of your income earned from your remote work (and any other earnings) on a your Georgia resident state tax return.
Don’t Worry About Calculating State Taxes, We’ll Do the Work For You
Why go to the trouble of filing multiple tax returns on your own when you can have it done for you? With PriorTax, you’ll simply enter the information listed on your W-2 form(s) along with any other tax information you have. We’ll do the hard work for you!
That means you can have all your state taxes along with your federal tax return done at once with PriorTax! Not only that, but you’ll be able to reach out to the PriorTax team with any questions or tax concerns via phone, chat or email!
Once the 2015 Tax Season begins, you’ll be able to create a 2014 account and e-file your 2014 taxes with PriorTax. Until then, you can get caught up on your late taxes!
Photo via Ray Smith on Flickr
Are there any issues with my remote work taking me to work at the home office for a few days a year? If I sit at a desk at all is that ok? For instance if I travel once a qtr for meetings will this cause issues with the “tax man”
One of the benefits of working at home is that you can deduct legitimate expenses on your taxes for the business use of your home. If you decide to deduct this expense, you must be able to substantiate your home office deductions. The same applies for the deduction of your travel expenses. If you claim expenses on your return that you are unable to provide supporting documents for, you may be at risk of an IRS audit.
I live in WA state (no state income tax) but am considering working remotely for a company based in Maryland (state income tax). On the MD tax site, it says I would be subject to their state income tax rates plus a 1.75% special tax rate as a non resident filer. Is this accurate? Will I be hit with a huge state income tax bill in 2018 even if my pay stubs list WA state?
Yes, by law, nonresidents who work in Maryland are subject to the appropriate Maryland income tax rate for your income level, as well as a special nonresident tax rate of 1.75%.
I work for Johns Hopkins University, but work remotely from Tennessee where I am a resident. It’s been a long haul, but I do NOT pay Maryland taxes because I did not physically work there, despite earning income from a Maryland entity. This has been supported by both the State of Maryland Dept of Revenue and the university.. Lucky for me, Tennessee does not have state income tax.
I am trying to convert my current job in Ohio to a remote job in the state of Michigan. My HR department says I cannot because they don’t have any agreement set up with the State of Michigan. Wouldn’t my taxes be taken out for Ohio since that is where the employer is?
Generally, if you live in one state and work remotely in another, then you would only file and pay taxes to your resident state. However, if your W-2 form lists OH in box 15, then you’ll need to also file a non-resident tax return for OH.
What are the implications for the company in this case? I am dealing with the same situation at my work. I work in Oklahoma but would be looking to work remotely in Utah for half the time. Would my company now have to deal with corporate taxes in Utah? Or would it only apply to my personal taxes?
It is dependent on how your company chooses to file your state income and taxes withheld. You will be able to determine this once you receive your income statements for the year of filing. For your situation, the concern would be for your return alone.
I am teaching English to students in China remotely. What do I do about Taxes in that situation since I independent contract with a Chinese company.
The income that you are earning is still subjected to taxes, however, you may receive a credit from the foreign income that you are reporting if there is one that can be allocated to your US return when you have paid taxes to China. For further advisement, it may be best to discuss your return with a licensed CPA or personal accountant that specializes in foreign income tax returns. We will not be able to assist you any further in this matter as we do not prepare foreign income tax returns.
I work remotely in the state of Maryland. My employer is in AZ. I have taxes being taken out for MD (Residence) and MD (Work). This doesn’t seem right. Why would I pay twice, once to the state and once to the county? I can’t get a straight answer from HR. Can you explain?
According to your situation, you are paying local and state taxes to Maryland. Maryland has 23 counties and Baltimore City which collect local tax. Visit the Maryland State Department of Revenue for further details.
My wife works from home for a company located in Indiana (we live in California). The company has been withholding IN taxes, but she is only in Indiana at most 3 weeks during the year.
If I understand it correctly, we should file both CA and IN returns. She should be paying CA tax, even though the company has been withholding for IN. Shouldn’t we get all of the IN withholding refunded back to us (from IN) and then pay CA tax based on her full income?
I’d much rather pay IN taxes (at least 4% less than CA), but I think we’re on the hook for CA.
She’s also asked the company to start withholding the CA rate. Is there any reason why they wouldn’t want to?
It is in your best interest to file a resident return for CA and a Non-resident return for IN so she can receive a credit from CA for taxes paid to IN.
I work remotely from my home in TN for a company in GA. Do I still need to pay GA state income tax?
If not how do I get my employer to stop taken GA state income tax out?
My company is a Maryland employer. We have an employee that lives and works in Georgia and she is set up with GA withholding taxes. She will be taking on two additional positions and the work for those positions will be done in Maryland and we need to set up taxes on the positions because each one is paid at a different rate and is considered a different file number in our payroll software. Should her withholding taxes be set up as Maryland for these two positions because the work is being done in Maryland?
My husband and I are both contractors on temporary assignments away from home. I work for a company in VA and my husband works for a company in PA. Our permanent resident is in TX but we live in DE so we both can commute to work. I sometime work remotely in DE when I do not have to go to the VA office. Do I only file in VA since my W2 has VA and my permanent resident is TX?
I live in and work remotely from Nevada for a California company. Are my wages subject to CALIFORNIA income tax?
Whether or not you will need to file a non-resident State with CA will be dependent on how your employer reports your income earned. If your W-2 that you receive at the beginning of filing next year shows CA State information, you will need to file a non-resident return. Otherwise, it will not be necessary, according to the information provided by the employer.
I live and work in Seattle, WA have lived here for 6 years. My new company headquarters is in NJ, but I do not work there..all my clients and business is in WA. They are taking NJ state income taxes out of my check. But, since I do not work there or live there, should they do this? My last company , also based in NJ, did NOT take NJ taxes out because I do live in a Non-Income tax state.
Thank you!
I am currently a resident of Utah (income tax state) but am going to be moving to Washington (no income tax state) and will still work for the same employer, but remotely and will also travel back to my Utah employer’s office every 2 months or so. Do I understand correctly that ANY wages paid by Utah employer, whether I am physically in UT or WA, are taxable by Utah? I see in Utah’s tax guidelines that all income source by a Utah employer is taxed…but the actual example provided shows a person from another state physically working in Utah…not remotely working. Does it matter WHERE I am, as long as I am working for the Utah employer, to be taxed by Utah?
And please correct me if I’m wrong, but since WA is a no income tax state, there isn’t anything the Utah employer needs to do differently as far as registering with any WA state agencies?
Thank you!
I currently live in North Carolina, and work remotely for a company in Minnesota. Ever since my move (sometime in March), my employer isn’t withholding any state tax. I’m not sure why they aren’t at least continuing to take MN taxes out, and haven’t gotten any response from my Payroll department. Should MN taxes be taken out or NC? If they aren’t taking them out right now, will I just owe a lot of state tax come tax filing time?
I live in Texas, and work partially in OK and partially in TX. The yard I report to is based in Ok, can OK tax all of my income even though I only worked maybe half the year there?
Similar scenario to those above:
I live in Texas but may take a position out of NYC. If I work remotely, do I have to pay the NY state income tax and the city local tax?
I live in Alaska and contract remotely for a company in California. My income from CA is reported on a 1099 not a W2. Would I need to file a non-resident tax return in CA?
My husband and I live in TN. My husband works remotely for a company based out of NJ. He does not go to the NJ office for business. His employer is telling him that he has to pay NJ taxes, which is incorrect and ridiculous. One gets taxed where they live, not where they work. And considering he does not physically earn income by physically going to NJ everyday, via physical commute, this is doubly ridiculous. We have asked the employer to correct this multiple times, to no avail. Is there any supporting documentation, or an IRS publication that you can provide so we can show it to the employer? For whatever reason, the employer is reluctant to change the deductions and says he “needs to look into it”. Thank you
I live in Indiana and work remote for a company in Nevada. Does the Nevada company have to withhold state taxes?