Tax Complexity for Remote and Hybrid Workers
Double Taxation Risk for Remote and Hybrid Workers on State Taxes (PHOTO: AOL.com)
Navigating Tax Challenges for Remote and Hybrid Workers
In 2023 many people started working from home because of the pandemic. This was a big change for a lot of workers. Some people also started working in a mix of home and office which is called hybrid work. This was nice for workers but it also made taxes more complicated.
Some people who worked in one state but for a company in another state might have to pay taxes in both states. This was a problem for people who lived in a state with no income tax. They might have to pay taxes in the state where their company is and where they work from home. This could make their taxes higher.
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Navigating Tax Implications for Hybrid Work
People who did hybrid work had to figure out how much of their income should be taxed in each state. If they spent most of their time working from home in a state with high taxes they might have to pay more in taxes. In 2023 the way people worked changed a lot because of the pandemic. This made taxes more complicated for some workers. People who worked from home in a different state than their company might have to pay taxes in both states. Hybrid workers also had to figure out how to divide their income between different states for taxes.
Double Taxation with Convenience of the Employer Rule
The convenience of the employer rule in certain states including Connecticut, Delaware, Nebraska, New Jersey, New York and Pennsylvania can create tax challenges for remote workers. If your employer is based in one of these states but you work remotely from another state for your convenience you may be subject to double taxation. This means you could have to pay taxes in both the state where you live and the one where your employer is based. Mandy R. Riles a tax manager at WIPFLI noted that this rule could result in individuals paying state income tax on more than 100% of their wage income due to the loss of out of state credits on their resident state tax returns. However some taxpayers may be able to avoid double taxation through state reciprocity agreements.
What to Do if You Are a Hybrid or Remote Worker?
Janet Krochman a certified public accountant advised people to talk to their company HR department to find out if they need to pay taxes in the state where they work remotely. If they do they can fill out a special form to make sure they do not pay too much. This is important because they might get all their money back when they file their taxes in their own state.
If you live in one state and work in another whether you work remotely or in a mix of home and office its a good idea to talk to a tax professional. They can help you figure out if you will have to pay taxes in both states or if there is a special agreement between your state and the one where you work.
