The onus is on the taxpayer to know the rules as they apply to them, where they need to pay taxes, and how much. Taking time to read up on the tax implications of remote work will help to stave off frustrating hiccups down the road. In these uncertain times, it’s essential to educate oneself on the changing tax rules and prepare for filing, giving plenty of time before the deadline.Ī recent Harris Poll showed that many people are “not very” familiar with the tax laws in their state of residency or the state where their employer is located. Workers who use 1099 and Schedule C forms, as well as sole proprietors, can still take advantage of deductions for their home office setups. While contract and self-employed workers can still take some home-office deductions, this pre-pandemic act left a lot of new remote workers out in the cold. Miscellaneous itemized deductions were ended for the majority of remote workers, such as deductions for desks and computers. The pre-pandemic Tax Cut and Jobs Act of 2017 ended some deductions that remote workers enjoyed when they set up their home offices. Deductions and Tax Implications for Home Offices Some states that had pandemic-related moratoriums on tax obligations for remote workers who were traveling state to state, or staying temporarily in certain states, ended those exceptional breaks for 2021. Many states, however, provide a credit to make up for double taxation. This “double taxation” of sorts has led some workers to flee these states in favor of states with low or no state income tax, such as Florida. Some are reevaluating the rules to see if they can recoup lost revenue.Ĭurrently, there are seven states where workers incur a tax liability from their state of residence and the state where their company is located: Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvania. However, remote work has grown in popularity so much that states are starting to become concerned about the lost revenue that comes with employees leaving high-tax states in favor of low-tax states. Typically, the rule is that employees pay taxes based on the state where they reside. Because taxation of remote workers is still in its relative infancy, some states are still adjusting to nonresident remote workers employed by out-of-state companies. Location also matters when considering companies with central locations that employ remote workers across the United States. Ten states have a flat income tax, and nine states have no income tax at all.
Thirty-two states have graduated income taxes similar to the federal income tax. Many people who found themselves working remotely took the opportunity to relocate to low-tax states or areas that better suit their lifestyle, such as the beach or mountains. One of the most appealing aspects of remote positions is working anywhere you’d like, as long as there’s reliable Wi-Fi. Here are some tips to assist remote workers in navigating their 2021 taxes. This onslaught of new remote workers will lead to many people tackling income taxes for remote work for the first time. A whopping 51% of Americans worked remotely at one time or another between April 2020 and April 2021.
#PAYING STATE TAXES WHILE WORKING REMOTELY CODE#
Knowing the ins and outs of the tax code and how it applies to remote workers can be daunting. Whether you work for a small mom-and-pop or a large, multistate company, being a remote worker can add an extra layer of difficulty to your income tax filing. With so many workers going remote and staying that way, their approach to doing taxes may be changing.
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