leftky.blogg.se - Paying state taxes while working remotely

The state of Massachusetts typically taxes nonresident workers on the wages they earn while in the state.

Massachusetts' Convenience of the Employer Rule However, if the other state doesn't apply the Convenience of Employer test, Connecticut doesn't apply it for those who have worked remotely.įor example, if you are a resident of New York and have worked remotely for Connecticut employers, you will qualify under the convenience rule because New York has implemented the rule. The state of Connecticut has adopted a tax policy that requires employees in the state to pass the Convenience of the Employer test only if the employee's residence state applies similar tax laws for work performed for a Connecticut employer. Connecticut's Convenience of the Employer Rule The five states are:Īt the same time, two additional states use a variation of the rule for tax purposes: Massachusetts and Connecticut. Multiple states have adopted this rule that heavily impacts remote employees.

If the employee's residence state has taxes in the tax code, they must pay income taxes there as well.

The employee would have to pay the state income tax rate where the employer is situated.

Under the Convenience of Employer Rule, a remote worker who earns wages from a business located in one state could be on the hook for paying taxes in the state of the employer's office as well as their own.Īs a result, employees that work remotely for business in a convenience rule state could be subject to double taxation: However, it often results in remote workers paying double state income tax rates, which can mitigate the benefits of working remotely. This rule is designed to help regulate income tax withholding. However, because of the emergence of telecommuting and remote workers, several states have adopted the Convenience of Employer Rule (COE). In most states, when an employee works remotely for a business in a different state, they would only be responsible for paying taxes in their resident state. What Is the Convenience of Employer Rule? Remote workers whose organization of employment is based in certain states may owe taxes in the state the company is in and their state of residence because of convenience rules. Some remote workers could end up paying an income tax in two states, which means doubling their personal income taxes for the state. However, as remote work increases in popularity and workers migrate, it's causing states to lose significant income tax revenue. If this worker decides to relocate to the sunny state of Florida, where there is no state income tax, the worker could avoid state income taxes altogether.

area will pay a maximum individual income tax rate of 8.9%. This tidbit can offer significant advantages to workers who live in a large city and want to migrate to a rural area or another state with lower or no state income taxes.įor instance, someone who works and lives in the Washington D.C.

Remote Workers, Convenience Tax, and Tax LiabilityĪs a general rule of thumb, workers are required to pay state income taxes to the state they reside in. Let's take a deeper dive into the subject surrounding state tax implications of working remotely from another state. Remote workers in New York and the surrounding states may be subject to double state income tax taxation. While the new arrangement offers a number of key benefits - including convenience - these benefits are coming at a tremendous cost. Amid the global pandemic, the face and nature of work quickly evolved from in-office to a work-from-home, remote employment landscape.