CNBC Select spoke with two CPAs to get their advice on what remote workers should pay attention to this tax season and how to go about preparing their taxes. If you work at a larger company, for example, they can assign you to an office outside of convenience rule states so you can avoid being taxed by a state you aren’t in, Stanton said. The Tax Foundation’s Walczak said that by looking for short-term tax windfalls, convenience rule states might lose long-term tax gains by driving businesses elsewhere. One of the most important things in properly filing taxes as a remote worker is enlisting the help of a qualified tax professional to assist in filing. Given the ever-changing tax landscape, this may not be the year to rely on free tax software.

  • If a taxpayer creates nexus in a new state due to remote work, this may reduce throwback sales in the states from which goods are shipped.
  • In a traditional, in-person work environment where your employees live and work in the same state as your organization, there’s less uncertainty to navigate.
  • If you haven’t already done so, you’ll need to find out where remote employees are working from.
  • California has taken this approach, but other states have gone in different directions.

A permanent remote worker will file their personal income taxes in their state of residence, whether they are a W-2 employee or a 1099-NEC independent contractor. At the federal level, employers must withhold federal income tax, Social Security taxes, Federal Unemployment Tax (FUTA), and Medicare taxes for all W-2 employees, including remote workers. Generally, state and local income taxes should be withheld where the employee performed the services. Meanwhile, nonresident taxpayers working in other convenience-of-the-employer jurisdictions should consider whether to file similar refund actions challenging the convenience-of-the-employer rules.

Tax planning for the TCJA’s sunset

Digitally, create structured routines that signal the beginning and end of the workday, such as shutting down your computer or turning off email notifications outside of work hours. Utilize productivity tools, like time-tracking apps or task management software, to help you manage your time effectively. It is also essential to enable all employees to maintain healthy boundaries between their professional and personal lives. Remote work can present various distractions, making it difficult to maintain consistent productivity. Disruptions like household chores, family obligations, or even social media can be more tempting when working from home.

It’s also worth adding that independent contractors must pay taxes by themselves because companies usually don’t withhold taxes for them. For the employer to be able to withhold taxes in an employee’s home state, they’ll need to make sure that they have followed the proper procedures to register within that state. If you partner with a payroll provider, it may be able to help you streamline this process.

Trust G2’s multi-country payroll leader to keep you compliant

Some countries will impose a social security tax on wages of remote employees, but the U.S. has totalization agreements with some countries, like Canada and France, to avoid double taxation. Nexus is the legal term for whether a state has the power to tax your business. This usually means that the business has a physical presence in the state, which can mean property, sales, or employees. If a company has its offices in State A and employees working remotely in State B, State B may claim that a part of the company’s income taxes must be paid to that state. If you are a citizen of the United States working remotely from another country, you may need to fill out some forms, but in most cases, you only owe taxes in the country where you live and work.

If you have a telecommuting employee in a different state than your office location or have employees in multiple states, you must withhold income taxes for the state they live and work in. You’ll pay unemployment taxes and report their income to the states where they live, not your state. In a traditional, in-person work environment where your employees live and work in the same state as your organization, there’s less uncertainty to navigate.

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