Moved & Remote

[Hanmatay]

My family and I moved from Utah to Oregon at the end of January 2021. My wife is still employed at her job in Utah and works remote. Currently her tax deductions are the same as if in Utah. What do we need to change her deductions to in order to be taxed correctly and not end up paying when filing our return? Her boss mentioned having her assigned as a contractor, but I don't know anything about that. We rely more on a large tax return and want to keep it that way if possible.

[Nick-K-EA]

The big question for your wife is, is she still a Utah employee? If she has given up her desk in the "home office" and is permanently working from home, and considered a visitor if she comes back to the office, then she is not. In that case, the employer should be withholding Oregon taxes rather than Utah. If they continue to withhold Utah taxes, all is not lost: You will file a Utah non-resident return to get a refund of the withholding, and an Oregon resident return on which you will owe. Of course, the refund usually takes longer to arrive than the debit for the amount owed, but in the end, it all works out.

Should she become a contractor, that's a whole different story. In that case, she will be responsible for paying quarterly estimated taxes to cover her self-employment tax and income tax, because contractors have no withholding.

[Hanmatay]

Thank you, Nick! We'll proceed accordingly.

[jepperson]

If your wife is still considered an employee of the company (receives a W-2) your wife's employer should be withholding OR tax instead of UT from the date you moved and she began working remotely.  She can complete the following form and submit to the employer so they can withhold OR taxes from her paycheck.

https://www.oregon.gov/dor/forms/FormsPubs/form-or-W-4_101-402_2021.pdf

When tax time comes, you will go through the Federal section and then start your state taxes. You will go through UT (non resident state) first and then complete OR (resident state). If she paid taxes to UT while living in OR, she will be credited for those taxes on your OR tax return.

If your wife's employer is paying her as a contractor (1099-NEC) she is considered to be self employed. As a self-employed individual, generally you are required to file an annual return (Schedule C)and pay estimated tax quarterly.

Self employed individuals can deduct expenses (mileage, business use of phone, home office expense, etc. )occurred from self employment earnings. https://ttlc.intuit.com/community/self-employed/help/what-self-employed-expenses-can-i-deduct/00/255...

Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. In general, anytime the wording "self-employment tax" is used, it only refers to Social Security and Medicare taxes and not any other tax (like income tax).

Before you can determine if you are subject to self-employment tax and income tax, you must figure your net profit  from your business. You do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040 or 1040-SR.

TurboTax will walk you through all the steps to enter your self employment income and expenses:

To enter your home office, vehicle mileage, supplies, and other common business expenses:

1. Type Schedule C in the Search box.
2. Select the Jump to link.
   • If this is your first time working in this section: You’ll be asked some questions about your self-employment work and income and then have a chance to enter your expenses.
3. Select an expense type that you had.
4. Enter your expense description and amount. (We may ask you some additional questions for certain types of expenses.)
5. If you had more than one expense for a type, select Add another group to include them all.
6. If you have additional expenses of other types, repeat steps 3 through 5 above to add more.

Useful links:

https://ttlc.intuit.com/community/self-employed/help/what-s-the-difference-between-self-employment-i...

https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center#S...

https://www.irs.gov/forms-pubs/about-schedule-c-form-1040