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. Your employer should initiate a tax compliance review when it is made aware of a remote employee’s new location. In addition, I encourage you to follow up with a certified tax professional who is familiar with your new state and local taxation regulations.

There isn’t a hard limit on how much you can deduct for home office expenses. However, your home office deductions cannot exceed your business’ net income (the gross income it earns minus regular expenses). CNBC Select spoke with two CPAs to get their advice on what remote workers should pay attention to this tax season and how to go about preparing their taxes. Price can also be a factor when hiring a tax professional for this most unconventional of filing years. The price of tax preparers can vary wildly, and it may be beneficial to fork over a bit more than you typically do for someone who knows the new guidelines and can adequately file your remote-worker return.

Deductions and Tax Implications for Home Offices

While many states offered a pandemic-related reprieve that generally resulted in no tax filing obligation for remote workers who worked temporarily in their state, the leniency was for 2020 returns. And as the nation emerges from the pandemic, that compliance break will be going away. These taxes can include income, gross receipts, sales, and local business taxes, which can affect not only a company’s tax compliance but how do taxes work for remote jobs also financial statement reporting, registrations, data gathering, and documentation. That said, don’t be afraid to take deductions for legitimate expenses. Obih has seen eligible taxpayers avoid home office deductions because they’re afraid it’ll increase their risk of an audit. “Don’t have a fear of taking the deductions and the tax credits and benefits that are available to you just because of an audit,” she says.

  • Where remote work exposes the company to liability, such companies may need to consider creating “blacklist states” — states where employees are prohibited from working remotely.
  • Pre-COVID-19, before everyone started telecommuting much more, there already was brewing controversy.
  • Other states’ thresholds kick in faster, including 23 that want you to pony up on day one.
  • This includes encryption, multi-factor authentication, and regular security audits.
  • There is also a simplified method that is up to $1,500 (up to 300 square feet x $5 per square foot) that gives you a flat deduction without taking into account individual home expenses.
  • With remote capabilities, audit firms can take advantage of business opportunities in new markets or geographic locations where they might not have a physical office.
  • Double Tax Agreements (DTA) are designed to prevent double taxation for employees who are liable to pay tax in both jurisdictions party to the DTA.

Negotiations are still ongoing as the strike has entered its fourth day. The widespread strikes have resulted in 4.1 million missed days of work so far in 2023, according to data from The Labor Department, per The Wall Street Journal. The hottest place for coworkers to congregate lately is on the picket line. Accounting software for accountants to help you serve all your client’s accounting, bookkeeping, and financial needs with maximum efficiency — from financial statement compilation and reports, to value-added analysis, audit management, and more. An online confirmation solution enables auditors to easily send online confirmations to anyone, anywhere in the world, thus eliminating traditional paper-based methods that are prone to error and fraud. By implementing a fully integrated online audit engagement solution, you can manage all types of engagements (audits, reviews, compilations, and preparation) and keep up with regulation changes on the go while working in the field or anywhere else.

Global Operate Services

Apportionment drives the calculation of state taxable income or the taxable portion of a state’s franchise tax base. It also is a key driver of a taxpayer’s effective tax rate for financial statement reporting of current and deferred taxes. As such, it is imperative to accurately reflect changes in the calculation of apportionment during the tax year, as well as part of the tax compliance process. One way, if we’re speaking in the context of New York, is to just not come to New York to work at all.

Many of the states who put in these temporary rules didn’t really use the convenience tag. They just said, “Look, if you used to work in our state and then the lockdown happened and you’re working remotely somewhere else, we’re going to treat that as a day worked in our state.” That was the Massachusetts rule. Timothy Noonan of Hodgson Russ LLP discusses how some states tax remote employees and the effect of temporary pandemic tax changes. As companies and their workers tackle telecommuting’s evolving tax implications, Klein advocates an awareness of all relevant state rules on remote work. As you look beyond the pandemic, Deloitte can show how the tax function can play a bigger role to help protect and create value for your business.

What remote workers need to know about their 2021 taxes

Look for professionals who belong to prestigious professional organizations or come highly recommended by sources you trust. If you work at a larger company, for example, they can assign you to an office outside of convenience rule states so you can avoid being taxed by a state you aren’t in, Stanton said. The Tax Foundation’s Walczak said that by looking for short-term tax windfalls, convenience rule states might lose long-term tax gains by driving businesses elsewhere. Workers in New Hampshire and Tennessee may be subject to state taxes on investments and other income, but these states do not charge state taxes on wages. Unlike full- and part-time employees, self-employed and contract workers in New Hampshire may be subject to state taxes on their income in certain situations. On this journey, many firms may need to establish best practices around workflow, processes, communication, and logistics for remote audit teams.