If you work from home (WFH) or in other locations different from the location where your employer is based, you are considered a remote worker, aka a telecommuter, teleworker, e-commuter, mobile worker, homeworker, home-based worker, or cyber commuter. Whatever you or your employer choose to call it, working remotely can come with many benefits, but it can also make filing your tax return each year more complicated. Fortunately, a CPA in Charlotte, NC, can help you navigate all these details and determine which tax rules apply to you.
As a remote worker, you can work from anywhere in the world. But, if you worked from home or nomadically for an employer based in another state or country, you may have to pay additional taxes on your income. This is because you’ll be subject to the tax laws and be required to file income taxes in two or more states, depending on the number of states you worked remotely. If you worked remotely for multiple employers based in different states or countries, you’ll be subject to the tax laws and be required to file income taxes in each of those states as well. There are, however, certain special circumstances where you may pay less in income taxes.
Working in the Same State as Your Employer
When the location where you perform your remote work is in the same state where your employer is headquartered, you can file your taxes as you always have–either with a Form 1099-NEC or W-2, depending on whether you’re considered an independent contractor or an employee, respectively.
Working in a Different State From Your Employer
If you work in a state other than where your employer operates, you must still file your personal income tax return in the state in which you live (or what’s known as your “domicile.”) The one exception to this rule is if the state your employer lists on your Form W-2 is different than your state of residence. In this instance, you would file a resident income tax return in your domicile state and a non-resident income tax return to the state your W-2 lists. You won’t be taxed twice in this scenario, as your state of domicile will give you a tax credit dollar-for-dollar for income taxes you must pay to a different state.
Working Remotely in a Different State From Your State of Residence
If you work remotely in a state other than your state of residence, such as at a family member's home or at a second home, the state or states where you need to file your personal income taxes can be more complicated to determine. In these cases, speak with your tax accountant to figure out the tax laws that apply to you; these rules are typically based on your time working in a given state and income thresholds in that state. Also, you should speak with your employer for approval to file in the states where you’d like to file or believe you should file.
Working and Living in a State With No Income Taxes
If you work and reside in one of the nine states that don’t charge any personal income tax and your W-2 has no other states listed on it, you are not required to file income taxes in your home state.
Those nine states without personal income tax are:
- New Hampshire
- South Dakota
If you live in one of these states and only perform work in this state, you only need to file a federal income tax return.
Remote Worker Deductions
Which deductions you’re able to take as a remote worker depends primarily on whether you receive a Form W-2 or Form 1099 from your employer. If it’s a W-2, you can no longer claim the following deductions:
- Home office deduction
- Union dues
- Professional society dues
- Professional licensing fees
- Business travel expenses
- Meal reimbursements
- Supplies or tools reimbursements
- Educator expenses
Federal Taxes for Remote Workers Within vs. Outside of the U.S.
When you and your employer work in different countries, your federal tax requirements vary depending on whether your employer is based within or outside of the United States.
If your employer is based within the U.S., you must pay taxes according to the location where you physically work rather than the country where your employer is based. A CPA in Charlotte, NC, can help you figure out those tax laws in the countries that apply to you.
If your employer is based outside the U.S., you will be subject to the tax laws in both the U.S. and that other country.
If you have residences in more than one state, filing your taxes may be a bit more complicated; so, too, if you work in a hybrid situation where you spend some time working at the company office and some time working from home or nomadically. For these reasons, seeking the aid of one of the top CPA firms in Charlotte, NC, like Scott Boyar, CPA, can help you navigate these situations.
If you are a non-U.S. citizen employed by a U.S.-based business while living and working outside the U.S., the U.S. will not levy taxes against you. If you are a U.S. citizen working remotely in another country, you may have some additional tax forms to fill out when you file your return. In most instances, you’ll only need to pay taxes in your country of residence and work.
If you live and work in a state with a reciprocity agreement with the state in which your employer is based, you may only need to pay taxes in your state of domicile and not the state where your employer is based. Different states have reciprocity agreements with one or more other states. Discuss with your remote CPA in Charlotte whether these circumstances apply to you.
Some states also have their own rules about tax requirements for people who reside there only part-time. Your CPA in Charlotte can help you determine whether you're required to pay income taxes in such a state.
Five states have convenience rules that could cause remote workers to be double-taxed on their income.
How to Pay Less in Taxes as a Remote Worker
To ensure you don't pay any more in income taxes than you need to as a remote worker, be aware of whether your worker status is as an employee or contractor. Familiarize yourself with the tax laws in the cities, regions, states, and countries where you live and work.
The top way to ensure you file correctly as a remote worker, avoid penalties for filing incorrectly, and pay the least required of you in taxes, is to consult a knowledgeable and experienced tax accountant. Scott Boyar, CPA, is an accountant in Charlotte, NC, who can help you assess your circumstances, figure out the rules that apply to you, and then determine and execute your plan for filing your returns. Contact Scott Boyar, an experienced remote CPA in Charlotte, today.