Hello, I live in Indiana with my spouse who works in Indiana.
I happen to work remotely for an employer based in Delaware.
My employer will not accept my home address in Indiana for paystub/W2 purposes.
My W2 and paystubs both list a previous address that I used to live in Delaware.
So as far as taxes are concerned, should I pay Indiana State tax as a resident and Delaware state tax as a non-resident?
What are my options?
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Since you live in Indiana and physically work from your home in Indiana, you are considered an Indiana resident for tax purposes - regardless of what address is listed on your W-2. You will need to file an Indiana resident tax return and report all of your income. As a resident, Indiana taxes all of your income regardless of where it was earned.
Whether your income is also taxable in Delaware depends on whether you are able to work in Delaware. Delaware has a "convenience of the employer" rule which states that income earned by nonresidents working remotely for Delaware employers is taxable in Delaware unless the remote work is required by the employer and not just for the employee's convenience.
If your employer does not have a location for you work from in Delaware, your income would not be taxable to Delaware. You'd need to file a nonresident return and indicate that none of your income is taxable in Delaware so that you can get back any tax withholding.
If your employer does have a location for you to work from in Delaware, but you have chosen to work remotely, your income would be taxable to Delaware. You'd file a nonresident return and pay the tax due on your Delaware income only. Indiana would provide a tax credit against your Indiana tax to avoid double taxation on the income that's taxable in both states.
In either case, I suggest making estimated payments to Indiana throughout the year to avoid having a big bill at tax time going forward.
Thank you for the response @KeshaH 🙂
I am going to file a Indiana tax return as "Full-Year Resident" along with my husband and then a Delaware tax return as a "Non-Resident" as per your suggestion.
Just a follow up question on that --
Currently I have provided a friend's address in Delaware as my address to my employer in Delaware, as my employer won't accept my Indiana address for W2 purposes.
What are my options regarding this?
Thank you in advance!
Enter the W-2 in TurboTax as it appears on your paper form. The address will not have an affect on your return. This income will still be taxed by DE and all of your income will be taxed by IN. It would be no different than someone moving mid-year.
The most important part of the demographic/personal info on your W-2 is that your SSN and name matches.
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