How to Handle 2021 Taxes as a Remote Worker

Commuting times are the No. 1 reason people don’t want to use their office, according to an October 2022 Gartner survey, followed closely by the cost of going into the office. „I’m certainly not saying there’s no value to being in-person at all,” she adds. She thinks leaders aren’t thinking enough about what, exactly, workers have gained over the years — especially the time saved by not having to commute. „There’s still not a ton of compliance, and there’s still pushback from employees, so I wouldn’t say the tide has turned in terms of mandates becoming something employees are onboard with,” Duffy says. New data shows that office attendance rates have, indeed, picked up since 2020, though even the latest annual autumn push shows the limits to how many more people may return. Bali’s thriving international community and abundance of co-working spaces make it easy for foreign workers to set up shop, find accommodation, and build a social network within the city’s borders.

In a handful of states that offer neither reciprocity nor credit, you may end up owing tax in both the state where you’re living and working and also in the state where your employer is. Many people are reluctant to return to the office, enjoying the freedom and ease of working remotely. Chart a long-term remote work plan that most effectively helps your workers thrive. Every company’s strategy is custom-built based on their industry, global footprint, talent needs, and company culture. Tax leaders must address questions around skills development and career progression in a mixed workplace environment. Your teams are likely to have questions about going back into the office post-pandemic.

Contractors, freelancers and the self-employed should track all work-related expenses

Full-time remote workers can only make standard or itemized tax deductions available to all other taxpayers. Independent contractors can claim business expense deductions on tax returns. Some states have reciprocal agreements that enable remote workers to pay taxes in just one state and avoid double taxation. A growing number of independent contractors and full-time remote workers try to keep up with how taxes work if you work remotely, as tax laws vary by state.

Remote workers and digital nomads can easily find a niche in the city’s business district. Bangalore’s climate is relatively mild compared to other regions of India, which makes it a more comfortable environment for foreign workers. The Department will follow the determination of the IRS regarding a worker’s employment status as an employee or as an independent contractor. Refer to Arizona Withholding Tax Ruling (WTR) 16-4 to determine if a worker is an employee or an independent contractor for Arizona withholding tax purposes. Some states offer reciprocity, which allows taxpayers to only pay in the state where they’re living and working. Employers would only withhold taxes where the employee resides, and the employee files that state’s tax return.

How to Limit Your Tax Liability as a Remote Worker

Understanding the breadth of your tax situation is like taking on another career. Confusion often arises when a worker lives in one state but works remotely for an organization in another. how do taxes work for remote jobs Taxes make up just one part of the enormously complex equation of working and hiring internationally. Businesses, meanwhile, must contend with issues of payroll, benefits, and compliance.

• If you work remotely in another state from your employer, you’re generally only subject to the laws and taxes of the state where you’re working.
• And still other states have a wage-based threshold for taxation, while nine states have no income tax at all.
• Amounts included in wages and subject to mandatory federal withholding are subject to mandatory Arizona withholding.
• You can deduct $5 per square foot of office space for up to 300 square feet (or $1,500).

Employees claiming to be exempt from Arizona income tax withholding, complete Arizona Form A-4 to elect to have an Arizona withholding percentage of zero and provide it to the employer. This means that the states in the agreement have made paying taxes to each state easier on the worker. In Connecticut, Delaware, Nebraska, New York and Pennsylvania, employers withhold income tax based on where the employer is located unless the company requires the worker to telecommute. During the pandemic, many Americans moved out of cramped, crowded cities to areas with more space or to be closer to their “bubble” of family and friends, even if it was to a different state.

Full-time remote employees

The only real difference is if your state has local income tax regulations across cities or counties. For instance, if you work remotely in the same state as your organization (whether that’s Arkansas or California), expect no complications about who receives your state income tax. However, extenuating circumstances often require remote workers to file a nonresident state tax return (for example, if they live in one state and work remotely in another). In a traditional, in-person work environment where your employees live and work in the same state as your organization, there’s less uncertainty to navigate. You simply withhold state and federal personal income taxes, if applicable in your area, and pay any required payroll taxes, like FUTA.

However, remote workers who travel to other states and work from there may have to file a nonresident state tax return. Remote workers do not have to file nonresident state tax returns unless they physically travel to another state and perform work while they are there. In certain cases, a reciprocity agreement may protect workers from taxes in different states.