Remote Workers: What You Need to Know at Tax Time

Working from home has drastically increased since the onset of the pandemic. Although working from home is convenient, you may become overwhelmed at tax time. If you work from home, you need to know what to do when you file your taxes to avoid any issues:

In Which State Should You File Your Taxes?

If you are a remote employee working from your home office, you will file your taxes in your state just like you would if you worked at your workplace. You will use your W-2 or Form 1099 if you are an independent contractor.

What If Your Employer Is Located in a Different State?

For many remote workers, their employer is located in a different state. This is part of what makes working from home so attractive. You can work for a company even when it is located a distance away. This may cause you some confusion when you file your taxes. Fortunately, you still will file your taxes in your home state.

There is an exception to this, however. If your W-2 lists a state that is not your residence, you will file a non-resident return in the state listed on the form. You will not be taxed twice. If you have to pay any income tax to that state, your state of residence will give you a tax credit you pay to your non-residence state.

What If You Work in a Different State?

If you live in a state but you work in a different state, there are some things you should know. Many people have moved to different locations for different reasons but still have a residence in their home state. If this is the case for you, check the tax laws in the state you plan to work from. You may have to pay non-resident taxes when you work in a different state. Part of the determination of non-resident taxes includes how much money you make while working in the state and how long you worked in the state.

Can You Deduct Your Home Office Expenses?

This will depend on your working situation. If you work for an employer and receive a W-2, you cannot deduct your home office expenses. This is due to recent changes in tax laws and miscellaneous expense tax deductions. If you are a 1099 contractor, however, you can deduct your home office expenses.

Always check with your tax accountant before you do your taxes, especially if you work from home. This area of the tax law can be confusing, so the help of a CPA tax service is beneficial.

About Me

starting up a small business with a loan

I worked for a cleaning company for about six years before I got tired of making the owner all kinds of money while he paid me an eighth of what he charged to clean each home. I started looking into what it would cost to start my own cleaning business and found it to be a very affordable venture. After I knew exactly what I would need and the insurance costs associated with the business, I started researching the loan options. I compiled what I learned about borrowing money to start up a small business here on my blog to help others hoping to do the same thing.