I started a new job working from home in October. Do I need to file in more than one state?

[DawnC]

Only if you also work in the state your employer is located. What matters is where you earned the income—not where your employer is located.

Example: You're a Vermont resident working in Michigan, where your employer is located. You would file a nonresident Michigan return in addition to your resident Vermont return. However, if you're working remotely in Vermont for a Michigan employer, you'd only file a resident return for Vermont, which is where you earned the money.

That's not to say payroll departments always handle withholdings correctly. Out of habit, or perhaps due to not being aware of how withholding works in these situations, remote employers sometimes withhold taxes for their state, not yours.

In these cases, you will have to file a nonresident return to recover the erroneous withholdings. On the nonresident return, you'd declare earnings of 0 so you can get a full refund for the taxes your employer withheld. You would also want to inform your payroll department of the error to avoid the same problem next year.

Related Information:

• What is a state reciprocal agreement?
• How do I file a nonresident state return?

[thehanny]

How would I know if they did withhold from the wrong state? Would it show on my paystub? I only received a W-2 for my state. 

[ErnieS0]

It depends on what state you live in—and what state your employer is located in. If the job you’ve been doing has always been work from home, then you probably only have to pay tax to your resident state. If your W-2 only has your resident state, then your company probably considers your work location to be your home state.

If your job is a temporary tele-working position, then it’s possible you have to pay tax in two states. Each state has different rules. Without knowing your home and work state, I can’t tell you if your state tax withholding is correct.

Your payroll or HR department is responsible for classifying workers and sending withholding to the correct state. Contact them.