How do taxes work for remote workers? Its complicated


Meanwhile, nonresident taxpayers working in other convenience-of-the-employer jurisdictions should consider whether to file similar refund actions challenging the convenience-of-the-employer rules. The property factor looks to the value of a company’s real and tangible personal property owned or rented and used within a state. In response to an increased remote workforce, businesses may shift the location of offices, or possibly provide office space more conveniently located for those remote employees.

As the name suggests, these states require employees to pay taxes as per the employer’s state, not their state of residence, where they work from home. States with convenience of the employer rules include Connecticut, Delaware, Nebraska, New Jersey, New York, and Pennsylvania. There’s the federal and state income tax—depending on where you live. Because the federal government levies these taxes, where you live doesn’t matter. Remote work tax rules depend on a number of factors, especially employee classification (independent contractor vs. full-time employees). Employees normally receive a tax return, while contractors will end up owing money if they didn’t make payments on their own ahead of tax day.

Guide to the H-1B visa & remote working

The Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the miscellaneous deduction for home office expenses for tax years 2018–2025, making employees not eligible to claim the home office expense deduction. The accountable plan allows employees to receive tax-free money for expenses while the employer deducts the expense. An employer should be ready to substantiate the business connection and cost of the expense.

Delaware remote work economy – The News Journal

Delaware remote work economy.

Posted: Thu, 25 May 2023 07:00:00 GMT [source]

The employer maintained its principal place of business in Maryland but employed one telecommuting employee in New Jersey. The employee worked from New Jersey writing software code for the company, which was incorporated into a web application provided to TeleBright’s clients. Apart from the one employee telecommuting from the state, TeleBright had no other connections with New Jersey. You may have moved your standing desk into the spare bedroom, but that doesn’t guarantee it’ll qualify for a home office space deduction. Your home workspace’s eligibility for a tax deduction depends on your employment status and how you use the space. Your teams are likely to have questions about going back into the office post-pandemic.

How remote workers can pay less in taxes

Many of the states who put in these temporary rules didn’t really use the convenience tag. They just said, “Look, if you used to work in our state and then the lockdown happened and you’re working remotely somewhere else, we’re going to treat that as a day worked in our state.” That was the Massachusetts rule. But even pre-COVID-19, the challenge was the inconsistency in the rules because only a handful of states had these rules and the states right immediately around New York, like New Jersey, Connecticut, and Vermont, didn’t have these rules.

remote work taxes