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Roanoke CPAs Weigh In: The Tax Implications of Remote Work

As Roanoke CPA professionals, we get quite a few tax questions about remote work. Remote work has become more common for many employees in America. In Virginia alone, the number of people working from home has risen significantly. According to a story by Cardinal News, only 5.8% of the workforce worked remotely prior to the pandemic. Today, that number has risen to 18.2%. 

Today, approximately one-third of the U.S. workforce works remotely in some capacity. Remote workers cite benefits like increased flexibility, higher productivity, low commute times, and less stress. It’s easy to see why remote work is attractive to many.

If you or your employees work from home, there are important tax implications that you should be aware of. Keep reading to see if they apply to you.

What Type of Remote Worker are You?

Remote work is a blanket term that applies to any form of working that’s away from an employer’s home base. Telecommuting is a popular way to work remotely: you work from home or another location instead of going into the office. In other cases, you may need to work away from the office temporarily to attend to a project or complete tasks. 

Whether you’re an employer hiring remote workers, or an employee who telecommutes, it’s important to know that employer and employee location have implications come tax time.

Remote Work and Taxes: What You Need to Know

U.S. workers pay both federal and state taxes. Employees pay income tax based on where they physically live, not where their employers operate. Your federal tax obligation remains the same as if you were both working in the same place. State taxes are a bit more complex and vary from location to location. Here is some important information to keep in mind about remote work:

  • Don’t Get Taxed Twice: If you live and work in a different state than your employer, it’s important to know if your employer has withheld taxes based on their state’s requirements. If so, you are eligible for a tax credit, ensuring that your income isn’t taxed twice. 
  • Are you Eligible for a Return? Some states don’t collect income taxes including:
    • Alaska
    • Florida
    • Nevada
    • New Hampshire
    • South Dakota
    • Tennessee
    • Texas
    • Washington
    • Wyoming 

If your employer operates in a state that does withhold income taxes but you live in a state that doesn’t, you could be eligible for a refund but you’ll have to file a return in your employer’s state. 

  • Convenience of the Employer Rule If you work remotely for a company based in Connecticut, New York, Nebraska, Pennsylvania, Delaware, Arkansas, or Massachusetts you’ll need to comply with the “convenience of the employer” rule to determine how your income will be taxed. Your income will be taxed according to your location only if you can show that your location is at the convenience of the employer, not the employee. Be sure to check the applicable state’s Department of Revenue to find out the relevant specifics.

Get Professional Tax Services for Remote Worker at Neely’s

At Neely’s our knowledgeable Roanoke CPAs are ready to help you with all your tax questions. Whether you telecommute or go into an office, we’ll work to make sure you get the maximum return you deserve. Work with a qualified accounting firm to save time and stress. Call Neely’s Accounting Services and get help with your taxes today.

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