Tax Filing FAQs for Remote Employees and Independent Contractors

Remote worker with laptop

Working remotely means that you work somewhere other than your company’s office some or all of the time. If you are working remotely in a different state than your employer, that will likely affect your tax situation. Here are some frequently asked questions about remote work and how it affects state tax filing. 

I work remotely for an out-of-state employer. Do I need to file taxes in two states? 

If your state and your employer’s state both have income tax, you should be prepared to file state tax returns for both states. You’ll file as a resident for the state where you live, and if taxes are withheld by the work state, you’ll file a nonresident return for the state where you work.

Where do I pay state taxes if I live in a different state than my employer? 

As a remote worker, you’re required to pay tax on all your income to the state you live in (if your state has personal income tax). This is true no matter where your employer is located.  

If your employer’s state withholds income for state taxes, you can typically claim a tax credit for the amount paid to your nonresident state, so your income isn’t taxed twice. Search the TaxSlayer knowledgebase for instructions about claiming the credit in your state.

Note: If your company is based in Arkansas, Delaware, Nebraska, New York, or Pennsylvania, these states apply a “convenience of employer” test to determine how remote workers’ wage income should be taxed. Under the convenience test, a nonresident employee’s income is sourced to their physical location only if the employer requires them to work remotely. But, if you’re working remotely for your own convenience, your income could be taxed by your employer’s state.

Since each of these states has its own criteria, you’ll want to check the Department of Revenue website from your employer’s state to find out how the convenience test applies to you. 

My state doesn’t charge income tax. Do I still have to file taxes in my employer’s state? 

Check your W-2 when it arrives. If another state’s withholdings are listed on the form, it means taxes have been withheld from your income and you may be eligible for a refund. In that case, you’ll want to file a return in that state.    

Does working remotely make me self-employed? 

Working remotely (working from home, telecommuting, etc.) is not the same as being self-employed. If you receive a W-2 from your employer, then you are considered an employee. The IRS uses certain criteria to determine whether a person is an independent contractor (self-employed) or employed. If you’re unsure about your status, you can read those criteria here.  

Can remote workers qualify for the home office deduction? 

It depends on your employment status. The home office deduction only applies to taxpayers who are self-employed. As long as your work situation qualifies you as an independent contractor, you can write off a portion of your home office expenses.

Read also: Everything You Need to Know About the Home Office Deduction 

Note: If you’re an employee and you receive a W-2 from your employer, you won’t be able to deduct your home office expenses.  

Are there any special tax deductions for remote workers? 

In order to deduct expenses related to your remote job, you must be self-employed. If you are an independent contractor or working freelance, you can write off certain job-related expenses on your taxes. Here are examples of several common self-employed tax deductions

If you are a traditional employee working remotely/telecommuting, those job-related expenses are not deductible.

The best online tax filing options for remote employees and independent contractors

Even though you have a non-traditional employment situation, your tax filing experience should still be straightforward. TaxSlayer has four different, easy-to-use online tax filing options. Check out our product lineup, and choose the one that’s right for you based on the type of support you need.

And if you’re an independent contractor, TaxSlayer Self-Employed is specially tailored to your unique tax situation and includes access to a tax pro with self-employed tax filing expertise.

Create a free account and start filing your return today!

This article is intended to provide general information to the public and does not provide personalized tax, investment, legal, or business advice. You should seek the assistance of a professional for advice on taxes, investments, and any other financial, legal, or business matter pertinent to your individual situation.

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