- TAX IMPLICATIONS OF WORKING REMOTELY FROM ANOTHER STATE UPDATE
- TAX IMPLICATIONS OF WORKING REMOTELY FROM ANOTHER STATE FULL
Even when states provide a credit, workers will have to shoulder that double tax burden until their tax returns come.
If your job is in New York but you lived and worked in Virginia, it’s possible you’d have to pay income tax in both states. If your job is in New York, a convenience rule state, but you lived and worked in Texas, you would have to pay New York income tax. If your job is in California but you’re living full-time and working remotely in Texas, for example, you wouldn’t have to pay taxes on your wages, since Texas doesn’t have income tax. It’s also important to consult a tax professional, since the tax situation - as well as what it takes to be a resident of that particular state - varies drastically by state and is far from intuitive. To avoid this, it’s important to notify your job where you’re living so it can withhold tax from the correct state. But in some cases, when the worker is totally living and working in a state, that state might rightfully want to tax that income and not offset taxes for the non-living, non-working state, leading to cases of double taxation, according to tax policy nonprofit Tax Foundation. Typically, when this happens, the state where the person lives would award a tax credit to offset taxes in the state where that person works. The convenience rule can obligate employees to pay income tax to states they might now never step foot in, since it taxes income based on the location of the employer’s office. Taxes are, of course, more complicated than that, especially if your job happens to be based in one of seven convenience of the employer, or “convenience rule,” states - Arkansas, Connecticut, Delaware, Nebraska, New York, Pennsylvania and, since the pandemic, Massachusetts - while you’re living and working elsewhere. It could also be a reason for more people to pull up stakes now that they’re less tethered to the office. If state B has lower income taxes than state A, that would be a boon for remote workers who moved.
TAX IMPLICATIONS OF WORKING REMOTELY FROM ANOTHER STATE FULL
So, if your job’s office is in state A, but because of the pandemic you’re living and working full time in state B, you’d pay income and all other taxes to state B. Generally, your income tax is based on where you’re physically located when earning the income. Ahead of tax season, here’s what to look out for when filing your taxes on remote work. The answers, unsatisfyingly, depend on a number of factors, including which states and how long you were there, according to tax experts we spoke with.
TAX IMPLICATIONS OF WORKING REMOTELY FROM ANOTHER STATE UPDATE
Reddit, specifically, is full of questions about where remote workers should file their taxes this year: If you quarantined with family for a couple months in a different state than where you work but didn’t update your tax withholdings, do you have to file two state tax returns? If you worked remotely in a state without income tax but your job is in a state that has income tax, do you have to pay it? What do you do if you’re being taxed by a state you haven’t set foot in? It can be a very complicated situation, and the internet abounds with people trying to figure out what’s going on. But in some instances it could mean having to pay taxes for a place where they now neither live nor work - or even being taxed on the same income twice. That could mean a higher standard of living and a lower income tax rate for the growing number of remote workers. The pandemic has accelerated the move to remote work and with it the possibility that those employees can live anywhere they please.
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