State Tax Consequences of Telecommuting

In the unlikely event that your company keeps track of when you're working in NC versus when you're working in Washington and they withhold appropriately for that, then give your payroll clerk a box of chocolate and a pat on the back from me. About the Author Amanda McMullen is a freelancer who has been writing professionally since They tax higher levels of income at higher rates. Almost every state which imposes a business income tax holds that employment of a telecommuter establishes the necessary connection. Visit performance for information about the performance numbers displayed above. The New York regulation known, for no obvious reason, as a "convenience of the employer" rule says , in effect, that unless Joe's home office meets more than a half dozen criteria--out of a list that includes such things as "The employee meets or deals with clients, patients or customers on a regular and continuous basis at the home office," and "Advertising for the employer shows the employee's home office as one of the employer's places of business"--Joe's gonna get taxed twice. The case of Connecticut and New York are particularly extreme, but they are not unique.

So, we included the amounts in our state income taxes for the State of Georgia where we lived for the years However, we moved back to Florida in mid Since Florida does not assess income taxes, we have not filed a state income tax return for the years

State of Employment

Income taxes can be pretty complicated, especially if you consider that many of the fifty states collect different types of income taxes, different rates of income taxes and some states collect no income tax at all. Each state even has its own rules about who is taxed and how they're taxed. So how can you make sense of it all? And what happens if you live in more than one state? Or join the military? Or have a really low income? Well, to answer these questions, we need to start at the beginning and understand what exactly the income tax is, well, taxing.

How Financial Planning Software Works. How to Apply for a Car Loan. How State Income Taxes Work. For many states, the largest source of revenue is state income tax.

See more tax pictures. Related Content " ". For the employee, the issue is which state or states taxes their wages. He receives a steady paycheck and is issued a W John lives in Illinois, but Elsewhere has its corporate headquarters in Florida. Does the result change if John works solely out of his home? Forty-one states impose a tax on personal income. Of those, 36 follow a physical presence rule. However, at present five states do not follow that rule. On the other hand, if John is regularly meeting with Illinois customers or potential customers, which is something he could not do if based in New York, and then New York will not tax those wages.

That is, his wages will not be double-taxed by both Illinois and New York. On the flip side, an employer who employs an out-of-state telecommuter should also consider the state tax implications. A business is generally subject to income tax in a state if it is deemed to have sufficient connection to the state such that it is fair and reasonable to impose a tax.

One of the prevailing factors in determining whether or not this connection exists is whether the business has employees in the state.

State of Residence

This isn't really fair to telecommuters and it impacts a company's bottom line as well, since they have might have to pay state taxes for even one lone employee working from home in another state. That's why HR , the Multi-State Worker Tax Fairness Act of was introduced; if passed, it will prohibit states from imposing income taxes on nonresidents who telecommute. The remaining 33 states and the District of Columbia tax income much the way the federal government does: They tax higher levels of income at higher rates. At the federal level, for example, a single taxpayer pays 10% on the first $9, of income, and then 15% of anything between $9, and $37,, 25% of anything between $37, and $91,, and so on. You only have to file and pay taxes in your home state of residence (where you are working for your employer remotely). Please let us explain further. Actually, it doesn't matter where you employer is located, as far as your personal income taxes are concerned.


Oct 25,  · State income tax - Company based in NC but work from home in WA I have a job offer from a company in NC. I will be working from home (Washington) % of the time. There will be travel to the company headquarters (%).Status: Resolved. If you work in one of these nine states, but live in one of the 41 states (plus the District of Columbia) that do impose state income taxes, you will generally pay only resident state income taxes for the state . But if New York's income taxes are higher than those of his home state, than he's paying higher taxes than his neighbor who doesn't commute out of state. He could be working from home nearly every day, being protected by the local fire and police departments, and yet be paying higher taxes to make these services available somewhere else.