Workers who use 1099 and Schedule C forms, as well as sole proprietors, can still take advantage of deductions for their home office setups. Most other self-prep platforms charge around that amount for each state return, so you could save $50+ just by filing with us. Thankfully, only a handful of states—Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvania—use the Convenience of Employer rule to at least some degree. If you must work from home to keep your job, your employer state can’t tax you. That said, it takes a lot to prove that you have to work from home, and an impossible commute does not count.

Some employees may qualify for a foreign earned income exclusion if they meet certain tests. Introduced with the Families First Coronavirus Response Act (FFCRA) are provisions to help employers give sick leave and family leave benefits to employees. The legislation directly affects small and midsize employers (with fewer than 500 employees), and it gives tax credits to help you pay for these benefits. However, if the employee resides in a different state than their employer, their hybrid schedule sometimes requires them to pay taxes in the state where they live and work from home and the state to which they commute.

Temporary out-of-state employees

This holds true, too, for lawyers, consultants and construction workers who may go to a different state for months for a job. While Telebright involved New Jersey law, the issue raised is not unique to New Jersey. In fact, the majority of states take the position that a telecommuting employee creates sufficient nexus to subject an employer to the state’s business taxes. Although the issues themselves are not new, the impact of those issues is now much greater since more individuals are working remotely than ever before. Thus, Telebright is an important reminder of the position taxing authorities can take, as this column next delves deeper into the issues raised by a growing remote workforce. Moreover, TeleBright was already withholding and paying New Jersey state income tax on the employee’s salary — thus, the additional effort of calculating and paying the CBT should not constitute an undue burden.

Knowing the ins and outs of the tax code and how it applies to remote workers can be daunting. A whopping 51% of Americans worked remotely at one time or another https://remotemode.net/ between April 2020 and April 2021. This onslaught of new remote workers will lead to many people tackling income taxes for remote work for the first time.

Out-of-state commuting employees

But not all remote workers “work from home.” To illustrate the different scenarios that remote work often refers to, let’s explore different types of remote work arrangements. It’s also not clear how many people are moving to https://remotemode.net/blog/how-remote-work-taxes-are-paid/ different states to work remotely, since there’s a lag in IRS data. But moving data from United Van Lines last year suggests people are increasingly moving from states with high taxes to states with lower or no income taxes.