February 10, 2021

Tax problems from remote work

 If you've been working remotely (as an employee or self-employed) from outside your "home" state, you may have to file income tax returns and pay taxes in more than one state. For people who have been traveling around and visiting multiple states... ouch! First find out if your "remote" state has an income tax. seven states — Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming — levy no state income tax; New Hampshire and Tennessee, don't tax earned wages. New York and California are "famously aggressive" about taxing remote workers according to Laura Saunders, writing for The Wall Street Journal, the source of much of this info. 

About 15 states (& DC) have cross border agreements with adjoining states to not tax workers temporarily WFH due to the coronavirus. Employers include info on where the worker earned money on W-2 forms. Tax preparers will also ask questions.

Each state tax system is unique with rules for how long a worker is in residence, how much income is earned, and the worker's true home state. You may be eligible for a credit to prevent or reduce double taxation. 

Find out the criteria for being a taxable resident in the states where you worked in 2020.

If your job is based in New York, Arkansas, Connecticut, Delaware, Nebraska or Pennsylvania but you worked in another state: the "convenience" rule taxes an individual on where a job is based, not where they reside or actually work. you may end up being taxed by the state where your job is based as well as by the state where you actually worked.

Sources of help: your employer, AICPA: https://www.aicpa.org/

 

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