State Return

[fasteddie577]

Hi, my daughter in-law lived and worked in Delaware for 2 years. She moved back to her home state Texas on June 15, 2023.  Her employer liked her work so much that after she moved back to Texas, he gave her the opportunity to work from home by way of online meetings.  How is her residence reported on her state return for 2023? I'm thinking that she would be considered a part time resident of Delaware and a full-time resident of Texas since she lived there for more than 6 months. Thanks

[CatinaT1]

She will be a part year resident of both states.

Delaware from Jan 1, 2023 to June 14, 2023.

Texas from June 15, 2023 to Dec 31, 2023.

[fasteddie577]

Thank you. Does living in Texas the last 6+ months affect the state taxes she paid in Delaware? 

[DawnC · Accepted solution]

Maybe.   For most employees, what matters is where you earned the income—not where your employer is located.   

Delaware can tax all of her wages because they have the 'convenience of the employer rule'.    If your employer is based in Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York, or Pennsylvania, you pay income taxes where your employer’s office is located.   Which would mean she would be required to file a non-resident return for her Delaware income earned while a resident of TX.  

However, if she can avoid that rule, see ways to do so below, then Delaware would only tax her wages she earned while physically working in the state of Delaware - which would mean no future taxes or tax returns to file, assuming she remains living in TX.   

Each state has its own guidelines, restrictions, and conditions regarding defining remote employees.   To be exempt from the convenience of the employer rule and instead qualify as a remote, out-of-state employee, you'd need to be working away from your employer's location for their convenience rather than yours.   This could happen for several reasons, including the employer needing employees that they can't attract in their home state or needing employees in multiple locations to serve clients around the country.

Other factors that might designate an employee as a remote worker for their employer's convenience include:

1. A home office is a requirement or condition of employment.
2. The employer doesn't provide the employee with an office or regular workspace.
3. The employer reimburses the employee for substantially all home office expenses.
4. The employee has a bona fide business purpose for working at home (for example, to meet multiple project deadlines in the home state).
5. The employee performs some core duties at home (for example, a stockbroker trades securities from home).
6. The employer or worker regularly meets or deals with clients, patients or customers at home.

How to allocate income for part-year state returns

[fasteddie577]

Thank you.