Working Remotely from Oregon with some travel to Montana

[lmichellejell]

I am going to be moving to Oregon within the next couple months and I want to make sure that I have my head wrapped around income taxes.  My current employer is located in Montana and will be allowing me to continue to work for them remotely while living in Oregon.  I will most likely be traveling back to Montana every 6 weeks or so to work in the office for a week.  Will I have to pay income taxes in both states? 

[Hal_Al]

Q.  Will I have to pay income taxes in both states? 

A. Yes. Or more accurately, you should file returns for both states. OR will give you a credit for what you pay to MT, so there will be little or no double taxation.

Alternate answer: Yes, but "nobody" does. 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.

It sounds like you'll be working in MT often enough ( every 6 weeks or so to work in the office for a week) that you should file a MT return, to be on the safe side.

[lmichellejell]

Great thank you so much!  Follow up question, when I do start working in Oregon, will my employer need to do withholdings from Montana and Oregon on each paycheck? 

[Hal_Al]

It is not mandatory that they withhold for both states.  But, you can ask them to, if that's what you want.  They may be planning to, so you should ask them. But, it's somewhat unusual.

[TomD8]

Some added detail:

If you move this year (2020), for tax year 2020 you'll be filing as a part-year resident in both MT and OR.  MT can tax ALL the income you earn as a MT resident.  It can also tax the income you earn by physically working in MT after you become an OR resident*.   OR can tax ALL the income you earn after you become an OR resident, regardless of where earned.  You'll be able to take a credit on your OR return for the MT tax you pay on the portion of your MT income that you earn after your move.

If your employer will not or cannot withhold OR tax, you may want to begin making quarterly estimated tax payments to OR after your move.  This reference gives the details on that: https://www.oregon.gov/DOR/forms/FormsPubs/publication-or-estimate_101-026_2019.pdf

*You become an OR resident for tax purposes on the day you begin living in your new home in OR.

[lmichellejell]

Thank you!  I appreciate the response.  I was wondering what Oregon's rules were for resident income taxes.  This has been very helpful and is making me feel much less stressed about working in both states.

[MaryK4]

Here is some information from the Oregon Department of Revenue.  See Part-year residents

@lmichellejell

[jschatz]

Flip the States, I left Oregon recently and will be working primarily remotely for the foreseeable future for a company in Oregon, while living in Montana. Does the same advice apply? The company I work for recommended maintaining a home of residence in Oregon or to go independent contractor because they don't want to deal with the tax situation. Should I setup additional withholding to be on the safe side since I'll be filing for both States?

[TomD8]

Once you become a MT resident, the income you earn by working remotely in MT for an OR employer is no longer taxable by OR, nor are OR employers required to withhold OR taxes on that income. 

ALL income you earn after becoming an MT resident will be fully taxable by MT, so ideally your OR employer will withhold MT taxes for you, although they're not required to do so.  If they don't withhold MT taxes, you should plan to make quarterly estimated tax payments to MT.

Once you're an MT resident, OR can still tax any income you earn from work physically carried out within OR, but they won't tax income earned from remote work done from a location outside the state.  So you will need to keep track of your days worked within and without OR.

[ErnieS0]

It depends @jschatz on how long you are working in Montana and whether you maintain a home in Oregon.

If you keep a home in Oregon you are probably still an OR resident and will have to file an Oregon income tax return. You'll also have to file a Montana return because you earned money in Montana. Oregon will give you a credit for tax paid to Montana.

If you went to Montana "for the foreseeable future" then you may be part-year OR resident and part-year MT resident in which case you would report income earned in OR on a part-year OR return and income earned in MT on a part-year MT return.

Your company should withhold MT tax if you work for them in MT.

If you become an independent contractor then you are responsible for your own federal and state taxes and should make quarterly estimated tax payments.

The IRS levies a penalty for underpayment of estimated tax if you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments.

Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller.

Refer to Penalty for Underpayment of Estimated Tax

[jschatz]

@TomD8 so if they continue to withhold for Oregon and I go to file next year, wont MT be credited the withholdings?

[jschatz]

@ErnieS0 We sold our OR home and bought a MT home. It was mid December that we made this transition so the part time residency is pretty much OR for this current tax season but will be 100% MT next year.

I say foreseeable future because there may be times that they want me to spend a week or two back in OR but, there is not planned schedule of that happening.

[DaveF1006]

@jschatz  In answer to your first question, if the state of Oregon continues to withhold taxes, you will file an Oregon non-resident return first. You will prepare a Montana resident return last and Montana will credit you with the taxes paid to Oregon. 

For this to occur, you must file an Oregon non-resident return first so that this credit will appear in your Montana resident return.