working remotely from another state taxes

#Working remotely from another state taxes full#
#Working remotely from another state taxes software#

Mark Klein, chairman of New York City-based law firm Hodgson Russ, told Saunders that 'it would be fair for New York to give a break from the convenience rule for 2020. 'If the other state taxes that income as well and doesn't give a credit for the New York tax, the worker will likely be double taxed.'

#Working remotely from another state taxes full#

'In other words, someone with a New York-based job who lives and telecommutes from another state still owes full income tax to New York on that compensation,' Saunders reported. These states follow what's known as 'the convenience rule': If an employee's job is based with an employer in one state, but he or she lives and works in another state out of convenience rather than because the employer requires it, then that employee owes income tax to the state where the job is based. The same is true in five other states'-Arkansas, Connecticut, Delaware, Nebraska and Pennsylvania, tax reporter Laura Saunders wrote in You may be on the hook for taxes there-even if the pandemic has you seeking refuge across state lines. But that's not always the case.įor remote workers, 'if your job is based in New York, Usually, if employees live in one state but have been working in another, they'll receive a credit on their resident return to offset the nonresident state tax liability. Failure to do so may expose the employer to liability, including penalties for noncompliance with the state's unemployment insurance laws. For remote workers employed by an out-of-state business, a state where the employee is working 'generally requires that the employer register for and pay the unemployment insurance premiums for the employee through the state unemployment insurance program where the employee is performing the services,' Brant noted. Failure to do so may expose the employer to liability, including penalties for noncompliance with the state's workers' compensation laws. States 'generally require that the employer register for and obtain workers' compensation insurance in the state where the employee is performing the services,' Brant explained. In particular, he recommended that employers understand state and local rules applying to: 'These laws may relate to.wage and hour rules, termination of employment, noncompetition, trade secrets, and sick and family leave rules,' Brant noted. In addition to state and local taxes, employers should be mindful that the labor and employment laws of the state where a remote employee is working generally will apply to the employment relationship. Out-of-state employers, however, may still have to withhold state income taxes for remote workers residing in these states. 'Being subject to state and local taxes generally requires both the preparation and filing of tax returns, and the payment of taxes,' Brant said.įor COVID-19-related remote work on behalf of out-of-state employers, some states have temporarily waived the creation of a business nexus for state taxes, according to Cincinnati-based law firm Taft Stettinius & Hollister. Tax requirements imposed at the city or county level could come into play. Employers could be subject to state income taxes, gross receipts taxes, and sales and use taxes, he explained. When an employee is working outside of the state or states where the employer operates, it ' creates physical nexus, subjecting the employer to the tax regimes of that jurisdiction,' wrote Larry Brant, a tax attorney in the Portland, Ore., office of law firm Foster Garvey. First, however, business managers must understand the tax laws of their home state and the state where employees are working remotely, Mittal advised.

'This introduces new concerns when it comes to legal and tax compliance.'Įmployers can take steps to help manage cross-border taxes on the business and to help employees understand their own tax obligations.

#Working remotely from another state taxes software#

'COVID-19 opened the possibility for employees to work from anywhere,' said Nishant Mittal, senior vice president and general manager at Topia, which makes software for managing remote workers. Remote workers also could find that they'll need to pay income taxes to more than one state on the same earned income. If a business has employees who reside and work in a state different from where the business is physically located or operates, it could face unexpected state and local taxes next year.