W-2 Remote Employee for company in WA while residing in OH

[TBF205860]

1. Do I need to file a Non-Resident tax form?

2. Can I deduct business expense through Ohio State taxes?

3. Does my employer have to register through Ohio State's tax agency?

4. Would the company in WA withhold OH state tax?

[pk · Accepted solution]

@TBF205860  generally, the earned income is sourced  where the work is done -0- there are of course exceptions.  But in your case 

1. You a resident of OH,working in OH, for a remote employer in WA --- you file a resident return for OH, you did not earn anything ( in this case ) in another state.

2. this remote employer income is treated as  sole proprietor/self-employment income.  It is reported on Schedule-C, you get to deduct all  necessary and allowable  expenses for this money stream.  Note this means that your contractee/ employer is not withholding any taxes  ( including  FICA), thus  you have to make quarterly payments  for federal and state taxes.  Additionally, you also have to pay the Self-Employment Tax ( equivalent to wage earner's FICA) at 15.3% on the net income i.e after expenses.  For employees, the employer and the employee each pay at 50% or 7.65% towards FICA / Social Security-Medicare. So you need to make sure that your  income from this stream allows for the extra 7.65%  hit that you will have because of this.

3. The WA company does not have to register in OH because you are a contractor to them

4. see answer to question 2.

Hope this helps

[xmasbaby0]

@TBF205860

 In your other thread you said you will be receiving a W-2.  Now you are implying you will be an independent contractor.   Which is it?   An employee is not the same as an independent contractor.  Working remotely does not make you an independent contractor.  If you are an independent contractor, then there is no employer withholding tax or Social Security or Medicare from your wages.   Will you be receiving a W-2 or a 1099Misc?

It is important for you to understand which you will be so that you can plan and approach taxes correctly. And it is important to be clear here so that we can answer you correctly.

https://ttlc.intuit.com/questions/2584365-am-i-an-employee-or-an-independent-contractor

If you are a W-2  employee you cannot deduct job-related expenses on your federal return--as was already explained in your other thread.  If you are a W-2 employee ASK the employer if they can withhold OH state tax from your paychecks.  Again--we already told you about this in your other thread.  If the employer cannot or will not withhold OH tax then you can pay OH estimated tax quarterly.

If you are going to be an independent contractor then please re-read the comments from Champ pk.  You will have to plan to pay self-employment tax for Social Security and Medicare as well as ordinary income tax.  And paying estimated quarterly federal and state tax would be necessary to avoid a large tax bill and possible penalties at tax time.

WA has no state income tax, so if you do not work in WA or live in WA you do not have any worries about WA.

[Hal_Al]

OH has no provision for allowing W-2 employees to deduct  job ("business") expenses. As others have said, the feds no longer allow job expense deduction, starting in 2018.  If you live in an OH city, with a city income tax, a job expense deduction may be allowed on the city (but not School District) return.  You'll have to check with your city to see if they allow  "form 2106" (job expenses) deduction.

WA does not have an income tax, so the question of paying tax to WA is moot.  But, even if the company you worked for was located in a state with a tax, you would not owe tax to that state, if you never physically worked there*.  Pennsylvania, Nebraska, Delaware, New York and New Jersey  are exceptions to that rule.  see: http://www.journalofaccountancy.com/issues/2009/jun/20091371.html

*Would you owe tax to the employer state, if you occasionally made trips there?  Yes, but "nobody" bothers with it. See http://money.cnn.com/2013/06/28/pf/taxes/business-traveler-tax-threat/  If you live in a state without an income tax (e.g. FL or TX), it’s more likely you should file in the work states. You can't use the "it all comes out even" rationale for not filing.

[Hal_Al]

Q 2. Can I deduct business expense through Ohio State taxes?

My previous answer assumed poster is a w-2 employee.  If you are a self employed person, filing a federal Schedule C, it works like this: You deduct your business expenses on federal Schedule C.  Your net profit or loss transfers to the OH state return.  You do not deduct any additional business expenses on your OH return.  BUT, OH allows a Business Income Deduction (BID) of up to $250,000.  So, you do not pay any OH tax on your self Employed income.