Do I need to pay taxes for that state?
The
general rule for telecommuting is that you file a return only in the state that
you are physically present in when you perform services. However, some states have a much harsher rule. Those states
are DE, NY, NJ, NE and PA. They may also include OR. These states tax wages in
their state as if performed in the state if the telecommuter is working in
another state merely for their convenience instead of necessity. NY has been
particularly aggressive about this. A discussion on the issue centering on NY
from the Journal of Accountancy is here.
If
you telecommute to a job in one of those states and don't meet an exception
(similar to NY's in the article) they would expect you to file a non-resident
return reporting and paying tax on your income from that state, and filing a
resident return in your own state reporting all of your income and claiming a
credit for tax paid the other state. In such a situation, you would want tax
withheld from wages for the state where you telecommute to.
If
you telecommute to a job in another state where you never have a working
presence (or to one of those states and meet an exception) you would file a
return only in your resident state.
