'Many companies will have triggers,' she said. 'Many times you have to indicate to your employer where you're working,' said Dina Pyron, partner at Ernst & Young and global leader of EY TaxChat. Start by letting your employer know that you've been working from a different state, so that you can make sure your state-level withholding is accurate. It's November, but that doesn't mean it's too late to get ahead of your tax obligations for the 2020 tax year. Personal Loans for 670 Credit Score or Lower Personal Loans for 580 Credit Score or Lower Additionally, some states are changing their rules - i.e., how long a person can work in there without being taxed - to be more accommodating to remote workers.Best Debt Consolidation Loans for Bad Credit A similar measure is pending in the House.Īnother Senate bill (with a related one in the House) would limit the ability of states to impose the 'convenience of employer' rule on nonresidents. A bipartisan bill in the Senate, the Remote and Mobile Worker Relief Act of 2021, would not let states tax or require withholding on non-resident employees who are in a state for less than 30 days (for this year, it would be 90 days). There's a chance that the taxation of remote workers could change at some point, given the growth of the nation's mobile workforce. However, Bannasch said, the calculation is not based specifically on the time spent in different states, but rather a combination of the amount earned in those states as well as some other factors (i.e., whether you have employees working for you and your sales revenue). This means you are responsible for figuring out which states you owe taxes to, based on where you reside and where you were when you earned the money. If your company is located in one of those states, you generally will pay taxes there unless your remote location is due to your employer needing you to relocate. Meanwhile, there also are a handful of states - Connecticut, Delaware, Nebraska, New York and Pennsylvania - that impose a 'convenience of employer' test for remote workers. For instance, if you live in Maryland but work in the District of Columbia, you only need to worry about having taxes withheld for Maryland. Basically, if your resident state has this pact with the one where you work, you won't have to pay in both jurisdictions.

Some states have reciprocal agreements with one another. And still other states have a wage-based threshold for taxation, while nine states have no income tax at all. Other states' thresholds kick in faster, including 23 that want you to pony up on day one. Different states have different approaches for when they expect you to report income earned there, and the rules don't necessarily mean you'll be paying more overall in taxes because most states provide a tax credit to eliminate double taxation (although that isn't always the case).įor example, some states let nonresidents work there for more than 30 days without a withholding requirement, including Arizona and Hawaii, which let you be there for up to 60 days. Most people surveyed (72%) were either 'very' or 'not at all' familiar with their state's tax requirements for remote work.

Of those who were still doing their jobs remotely in late 2020, about 30% said they were working in a different state than where they had lived and worked pre-pandemic, according to a survey done by the Harris Poll on behalf of the American Institute of CPAs. More from Personal Finance: 10 work-from-home jobs that pay six figures The best ways to invest when inflation takes off Covid scams cost Americans nearly $500 million In June 2020, an estimated 42% of the labor force was telecommuting, according to research from Stanford Institute for Economic Policy Research. Many workers began doing their jobs remotely more than a year ago when companies sent their employees home en masse due to the pandemic. 'As emergency orders are lifted, the guidance is changing,' said Eileen Sherr, director for tax policy and advocacy with the American Institute of CPAs. Best Debt Consolidation Loans for Bad Credit

Do i pay state taxes if i work remotely