Remote work has gained significant traction after COVID-19. Some companies even chose to transition to full remote work, whereas others require their employees to partially be present in the offices. While remote work is good, there are many questions as to how everything else functions, such as taxes. If you’re just starting working remotely or curious about how remote workers are taxed, we’ve got you covered. This article will cover everything you need to know about remote work and taxes.
All workers in the United States, whether remote or physically present in a workplace are required to file a federal income tax return. That’s, of course, assuming you meet the minimum income to file a federal income tax return, which is the standard deduction amount for that tax year. Read more on the minimum income to file taxes.
When your employer pays, you are already been issued a paycheck. Your employer may choose to send it to you by mail, require you to pick it up in person or send it electronically – either way they will file a paycheck.
As a product of this, they will withhold federal and state income taxes from the income you earned. If you live in a state where state income taxes aren’t collected, you won’t be subject to this. However, if the company is located in a state with income taxes, you might pay state income taxes. Check this with the state’s tax laws if the company you’re working for and where you live are not the same – more on that below.
Since your employer will withhold federal income taxes from your income regardless, there isn’t a special procedure for taxes. You’ll file your federal income tax return on tax season with the W-2 they issued and be done with it. With state taxes, this is somewhat more complicated.
State taxes for remote workers
The state taxes for remote workers is quite different than federal taxes. If the state you live in taxes wages, you’ll need to pay state income taxes accordingly. Let your employer know that your state taxes wages so that they withhold state income taxes if they are operating in a different state than you.
No state taxes if:
If both states don’t tax wages, you’re good to go without taxation. However, if the company is located in a state with income taxes and you live in a state without, things get a bit tricky.
Your situation and the laws that apply in the company’s state determine this. Since every state is operating rather differently, we can’t exactly pinpoint how state taxes work for remote workers. It’s best to consult the HR and your state tax department to get more details. Below, you can find the contact information for your state’s tax department.