RaifH
Expert Alumni

State tax filing

It depends if you are telecommuting due to a pandemic-related circumstance. You always pay tax to your resident state, which currently sounds like it is Maine. According to a directive released by Massachusetts, "employees filing a 2020 Massachusetts non-resident tax return who worked in Massachusetts prior to the Massachusetts COVID-19 state of emergency and who later telecommuted from locations outside Massachusetts due to a Pandemic-Related Circumstance must continue to source their wages earned from such subsequent employment to Massachusetts." This remains true until September 13, 2021.

 

So if you would have physically worked in Massachusetts if not for the fact that the pandemic shut everything down, your income would be taxable by Massachusetts until September 13, 2021. If you would have telecommuted even if there was no pandemic and never reported to your Massachusetts office, then it is not taxable by Massachusetts and you only have to pay Maine tax. 

 

If you became a resident of New Hampshire, your wages would not be taxed by any state. You would potentially have to pay Maine tax on renting out your home. 

 

If you determine that you do owe Massachusetts taxes because you were reporting to a Massachusetts office prior to the pandemic, you would receive a credit on your Maine tax return for the taxes paid to Massachusetts. You would only allocate the portion of your wages you earned until September 13 to Massachusetts and report this income on a nonresident Massachusetts tax return. After that, the temporary Massachusetts directive expired and your income is only taxable by your resident state. 

 

If you are a full-time telecommuter from out-of-state, it is not that difficult to file the state taxes as long as you and your employer are on the same page. For the most part, your employer needs to be pulling out the taxes for your resident state, not the state in which the employer is based. It becomes more difficult if you do have to go to Massachusetts on occasion for work. In that case, your wages may have to be allocated between what is earned in your resident state and your work state. Obviously, if your work state and resident state are the same, it eliminates that problem.