
The rise of remote work has reshaped how and where people can do their jobs. The freedom to work from anywhere, eliminate a daily commute and enjoy a better work-life balance are some significant perks of the digital age. However, this flexibility can also complicate your tax situation, especially if you live in a different state from your employer’s home base. You must grasp these nuances to comply with all applicable laws and optimize your outcomes.
If you work remotely for an employer located in a different state, you might be subject to tax obligations in both states. Generally, the IRS taxes your income in the state where you earn it. However, some states have reciprocity agreements that allow residents of one state to work in another without having to file non-resident tax returns. Without such agreements, you may need to file a resident tax return in the state where you live and a non-resident tax return in the state where your employer’s HQ is.
Your employment status also significantly affects your tax situation. If you are a full-time, salaried employee, your employer will typically withhold applicable state income taxes for the state where their home office is. In contrast, you are responsible for paying estimated quarterly taxes if you’re self-employed as a freelancer or independent contractor.
As a freelancer, the location where you work typically determines your tax liability. You’re responsible for understanding and adhering to the tax laws of the state where you work, which could be different if you’ve moved and are still contracting for businesses in other states.
Each state has a specific definition of what constitutes a resident for tax purposes. Generally, you are taxed as a resident if you spend 183 days or more in a state or your primary home is in that state. You should know these rules to file your tax return correctly.
If you’ve started a new chapter of your career working with a company in a different state, here’s what you need to know about how remote work can affect your tax situation.
Working remotely offers more flexibility and freedom, but it can also significantly change your tax situation. Full-time employees or independent contractors who work in different states from their employers should understand these differences to comply with all tax regulations and get the maximum benefit from their tax returns.
At Clear View Business Solutions, we specialize in helping full-time remote workers and freelancers manage tricky tax situations. Our expert team is ready to provide the guidance you need to make the most of your remote work arrangement while being mindful of how your employment situation could change your tax obligations. Contact us today to start a long-term partnership.
At Clear View Business Solutions, we know you want your business to prosper without having to worry about whether you are paying more in taxes than you should or whether your business is set up correctly. The problem is it's hard to find a trusted advisor who can translate financial jargon to layman's terms and who can actually help you plan for better results.
We believe it doesn't have to be this way! No business owner should settle for working with a CPA firm that falls short of understanding what you want to achieve and how to help you get there.
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At Clear View Business Solutions, we know you want your business to prosper without having to worry about whether you are paying more in taxes than you should or whether your business is set up correctly. The problem is it's hard to find a trusted advisor who can translate financial jargon to layman's terms and who can actually help you plan for better results.
We believe it doesn't have to be this way! No business owner should settle for working with a CPA firm that falls short of understanding what you want to achieve and how to help you get there. With over 20 years of experience serving hundreds of business owners like you, our team of experts combines financial expertise and proactive communication with our drive to help each client achieve results and have fun along the way.
Here's how we do it:
Discover: We start with a consultation to understand your specific goals, what's holding you back, and what success looks like for you.
Strategize & Optimize: Together, we design a customized strategy that empowers you to progress toward your goals, and we optimize our communication as partners.
Thrive: You enjoy a clear view of your business and your financial prosperity.
Schedule a consultation today, and take the first step toward being able to focus on your core business again without wondering if your numbers are right- or what they mean to your business.
In the meantime, download, "The Business Owner's Essential Guide to Tax Deductions" and make sure you aren't leaving money on the table.