That said, it takes a lot to prove that you have to work from home, and an impossible commute does not count. If you must work from home to keep your job, your employer state can’t tax you. In plain English, both your resident and employer states will tax your income. The Convenience of Employer rule essentially says that any income you earn for a company will be taxed in the employer state, regardless of your residency status. Probably-but first, let’s explain the rule. If my employer’s state uses the Convenience of Employer rule, will I owe income taxes in that state?
One quick note: Sometimes, a state will interchangeably use “part-year resident” and “statutory resident.” Just another reason to examine the language and rules for each state. Once you know what they’re looking for, you’ll be able to strategize ways to prove you aren’t a resident. The crucial move on your part is to check the residency rules. If you find yourself in this position, you can lower the odds of your employer’s state being able to claim you as a resident by examining the its definition of residency and distancing yourself from any qualifiers.įor example, if your employer state considers you a statutory resident if you spend more than half the year there, count days to make sure you don’t cross that line. Since any state claiming them as a resident gets to tax their income, they could get taxed multiple times on the same income.
Statutory residents can find themselves in a real bind. They usually pay taxes based on the months lived in each state (e.g., three months of taxes to the first state, nine months to the second).įor other taxpayers, just working a full-time job for a company could count towards being a statutory resident of that company’s state. Some statutory residents simply moved from one state to the other during the year. That’s a fancy way of saying “on paper, you’re a resident.” How could my company’s state claim me as a resident if I don’t live there?ĭifferent states have different definitions of residency, so if you’re considered a resident by a state that isn’t “home,” you’re called a statutory resident. For now, let’s look at how a state you don’t live in could see you as a resident. Only a few states have this rule, but we’ll come back to Convenience of Employer in a moment. We’ll look into that in a moment.īig Rule #2: Any state that uses the Convenience of Employer rule can tax your income, even if you aren’t considered a resident of that state. That said, your employer state may be able to claim you as a resident too. Since you live there and consider it home, you’ll pay taxes to that state. Naturally, your home state (also known as your domicile) is a given. Here’s Big Rule #1: Any state that can claim you as a resident gets to tax your income. I work remotely for a company in a different state-do I owe that state income taxes? Without further ado, let’s walk through what you need to know about state taxes and remote work. We’ll go into more detail on both so you know what to look for, but brushing up on the policies of the states you deal with is going to be crucial.
I’m going to do you a favor up front-if you remember nothing else from this blog post, remember to check each state’s policies on residence and the Convenience of Employer rule. If your remote work crosses state lines, determining how much income tax to pay which state can be challenging. The trend is sweeping the nation-but as geographical lines blur, state lines have become more important than ever. Remote work has been soaring in popularity since the pandemic forced many workers home early last year.
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