topic do note telecommuting rules vary by state in State tax filing

I work remotely for a company in another state, from whom I received a 1099-MISC. Do I pay taxes to that state or just to the state I'm living in?

katie-turnbloom — Sat, 01 Jun 2019 04:52:31 GMT

As an individual taxpayer, you only have to file a tax re...

GeoffreyG — Sat, 01 Jun 2019 04:52:32 GMT

As an individual taxpayer, you only have to file a tax return in a state where you are either physically living, or working, or where you may happen to travel and receive taxable income (we'll explain that below). But your short answer is that no, you don't need to file a tax return or pay taxes in the state where your company is located or headquartered. You only have to file and pay taxes in your home state of residence (where you are working for your employer remotely). Please let us explain further.

Actually, it doesn't matter where you employer is located, as far as your personal income taxes are concerned. Your employer could be from California, New York, or Paris (France), for that matter. For your personal taxes, the only relevant factors are where your legal residence is (called "domicile" in the tax jargon), where you work, and from where you may receive income. An example here will be illustrative.

Let's say a woman lives in Idaho, drives to work every day for a job in Montana, but her company is based in Colorado. On a vacation, she travels to Louisiana and wins money there at a gambling casino. She also owns a rental house in Oregon. In this (hypothetical) set of circumstances, this taxpayer would have to file a state tax return in Idaho (home state), Montana (because she worked there), Louisiana (because she received taxable gambling winnings from a casino there), and Oregon (because she has an income-earning rental house there). But, notice that she does not have to file a Colorado state return, even though her company is there. The reason for this is that she has no Colorado "nexus" for tax purposes.

If this same woman's situation is simplified down to just living and working all year in Idaho, for a Colorado company, then she just files a tax return for Idaho only.

The same rules apply to those who are paid by W-2 (employees) as well as those who are paid by 1099-MISC (independent contractors).

All that is to say that you just need to file a tax return for your home state . . . and don't worry about where your employer is located.

Hopefully this explanation makes sense. However, if you have further questions, encounter any difficulties, or just want to speak with a live tax expert who can walk you through your TurboTax entries (including the ability to screen-share with your computer), please feel free to contact us. We would be happy to help you (and as a paying customer, the call is free to you). Here is a link where you can create a support ticket and reach us:

https://support.turbotax.intuit.com/contact/

Thank you for asking this important question.

May I ask a follow-up question? What if I live in state A...

fengzheng-bit-ed — Sat, 01 Jun 2019 04:52:32 GMT

May I ask a follow-up question? What if I live in state A and work remotely for a company located in state B, and I occasionally travel to state B for work? For simplicity, let's say for one tax year, I live in state A for half a year and work remotely, and for the other half a year I travel to state B for work. Does this mean that I need to pay income tax for both state A and state B for half year? Thank you!

Please identify States A and B.

SweetieJean — Sat, 01 Jun 2019 04:52:34 GMT

Please identify States A and B.

@TurboTaxGeoffreyG There are a handful of states that t...

SweetieJean — Sat, 01 Jun 2019 04:52:34 GMT

@GeoffreyG
There are a handful of states that tax telecommuters who work for a company based in that state, regardless of where the worker lives or does the actual work.
<a rel="nofollow" target="_blank" href="http://www.journalofaccountancy.com/issues/2009/jun/20091371.html">http://www.journalofaccountancy.com/issues/2009/jun/20091371.html</a>
<a rel="nofollow" target="_blank" href="https://www.kmco.com/resource-center/article/looking-forward/state-tax-implications-of-telecommuting/">https://www.kmco.com/resource-center/article/looking-forward/state-tax-implications-of-telecommuting/</a>
<a rel="nofollow" target="_blank" href="http://www.koscpa.com/newsletter-article/state-tax-consequences-telecommuting/">http://www.koscpa.com/newsletter-article/state-tax-consequences-telecommuting/</a>
<a rel="nofollow" target="_blank" href="http://www.thetaxadviser.com/issues/2010/feb/apractitionersguidetothetaxationoftelecommuting.html">http://www.thetaxadviser.com/issues/2010/feb/apractitionersguidetothetaxationoftelecommuting.html</a>

@fengzheng.bit.ed @katie.turnbloom See comment directly...

SweetieJean — Sat, 01 Jun 2019 04:52:36 GMT

@fengzheng.bit.ed
@katie.turnbloom See comment directly above.

I live in Indiana (state A) and work remotely, and my com...

fengzheng-bit-ed — Sat, 01 Jun 2019 04:52:38 GMT

I live in Indiana (state A) and work remotely, and my company is in California (state B). I occasionally travel to California for work.

do note telecommuting rules vary by state

maglib — Sat, 01 Jun 2019 04:52:39 GMT

do note telecommuting rules vary by state

My company is based in Phoenix Az but all the job sites I...

taxquestion90 — Sat, 01 Jun 2019 04:52:43 GMT

My company is based in Phoenix Az but all the job sites I physically worked on are in NM, which is the state where I live. How can I get the taxes AZ withheld back? Why can they do that in the first place? I have never even been to the company headquarters in AZ.

Re: As an individual taxpayer, you only have to file a tax re...

1099erGirl — Mon, 08 Jul 2019 03:43:57 GMT

I asked my question more in full here:

https://ttlc.intuit.com/community/state-taxes/discussion/why-did-i-get-a-request-for-tax-return-california/00/824881

But this topic intrigued me because CA is causing issues for me with a letter saying I need to file taxes in CA even though I live and work in GA. And the majority of our income was from non CA sources. Probably less than 30% came from CA client. The rest were other states including our home state of GA.

According to their form, if my hubby and I jointly made over 34K I'm required to file in CA even though we don't live there. And I haven't been in that state or been a part year resident since 2015 when we moved but the TY in question is 2017. Any advice? If I fill out the form as they ask for b/c that line item is above 34K they want me to go through the process of filling out CA taxes just because it's over 34k!! Who does that? I had clients in 5 states that TY. And I certainly wasn't about to file state taxes in all 5???? Is that just a CA thing? How do I get out of filing taxes (which means buying software, filling out taxes for it, then filing the taxes all by 8/7? I just got the letter about this TODAY. So that's 1 month. But I don't see why it's any of their business what we made for the year in full when I don't live there? We already paid taxes for that year in full to federal and GA.

They do not provide a phone number to call and ask questions in this letter from CA.

Re: As an individual taxpayer, you only have to file a tax re...

worlhood — Tue, 13 Aug 2019 19:41:00 GMT

Thanks. This is a very helpful answer.

Live in Houston, but company is in San Francisco. Will SF federal tax be applied and what about state?

kaizad20 — Sat, 31 Aug 2019 18:34:35 GMT

I am considering an offer from SF, but will work from home based in Houston. Will I be paying SF federal taxes? and what about state taxes?

Re: Live in Houston, but company is in San Francisco. Will SF federal tax be applied and what about state?

xmasbaby0 — Sat, 31 Aug 2019 18:55:12 GMT

@kaizad20 There is no such thing as a San Franciso federal tax. San Franciso is a city. You pay federal tax to the Internal Revenue Service.

Please read the answers already provided in the thread above the question you posted.

Re: Live in Houston, but company is in San Francisco. Will SF federal tax be applied and what about state?

kaizad20 — Sat, 31 Aug 2019 19:31:36 GMT

Hello,

Just to confirm, so federal tax to be paid in whatever bracket I fall into and then No State tax since i am in Texas. Can you please confirm? Thx

Re: Live in Houston, but company is in San Francisco. Will SF federal tax be applied and what about state?

TomD8 — Thu, 23 Jan 2020 14:44:45 GMT

@kaizad20 If you are a Texas resident working remotely as an employee (you receive a W2 at year’s end) for a California company, as long as you never physically work in California your earnings are not subject to California state tax.

However, if you are working remotely as a sole proprietor (you receive a 1099-MISC at year’s end), for a California company, due to a recent court ruling your earnings are taxable by CA.

Re: May I ask a follow-up question? What if I live in state A...

gmelenyk001 — Mon, 21 Oct 2019 13:11:21 GMT

The company I work for is located in Michigan. However, I am a resident of Kansas, and I do all of my work remotely in Kansas. Where do I pay my State income taxes?

Re: May I ask a follow-up question? What if I live in state A...

TomD8 — Mon, 21 Oct 2019 14:33:08 GMT

@gmelenyk001 Your home state of Kansas can tax all your income, regardless of where you earn it. As long as you never physically work in Michigan, your income is not taxable by Michigan.

Re: May I ask a follow-up question? What if I live in state A...

maglib — Mon, 21 Oct 2019 15:49:16 GMT

You risk being double taxed if you live in one state but work for a company based in New York, New Jersey, Delaware, Pennsylvania or Nebraska. Michigan is NOT one of the states. These 5 states had a convenience vs. necessity test. If they determine that working from home is a matter of convenience for you rather than a necessity for your employer, you will owe taxes to those states on the income you earn during your telecommuting days.

Most states though do not tax telecommuters. If you have to be in the Michigan office on certain days though, you may be taxed on that income earned while having a physical presence. Salary, wages, and other employee compensation for work performed in Michigan is considered taxable. Many telecommuters must do office visits monthly. So be careful to ensure you do pay those taxes since your employer location is that state.

Re: Live in Houston, but company is in San Francisco. Will SF federal tax be applied and what about state?

magriff — Thu, 23 Jan 2020 11:39:58 GMT

Do you have any more information about this? Where can I find this recent court ruling? I work remotely from Ohio. I Live there and stay there. One company I contracted with was from Georgia, but the remote work was with their California clients.

One contract is with a California company, but I work remotely with their clients in Oregon.

Is it different in 2018 from 2019?

Thanks!

Re: Live in Houston, but company is in San Francisco. Will SF federal tax be applied and what about state?

TomD8 — Thu, 23 Jan 2020 14:49:28 GMT

@magriff -- It's called the Bindley decision, and it's detailed here: https://www.coblentzlaw.com/california-office-of-tax-appeals-gives-precedential-authority-to-bindley-decision-nonresident-sole-proprietors-out-of-state-services-to-california-customers-could-trigger-california-filing-requirem/

It seems that CA is going to tax non-resident sole proprietors who receive a 1099-MISC from a California company, even if that person has never set foot in California.