Tax Implications of Remote Work

The remote-work practitioner, however, has a greater responsibility for ensuring that there is adequate time for consulting, preparation, and review. Only by personally overseeing these critical measures in tax compliance and consulting can the remote-work practitioner deliver the highest-quality work. Due dates can be tracked similarly on an appropriate electronic platform, just as in an office. Whether on one’s stand-alone computer or through an office network, due dates should be readily available to practitioners outside the office. Even so, however, timely preparing and filing is a human-driven process; the presence of professionals in an office facilitates this process as in-person colleagues remind each other of workload and due dates.

US citizens who live abroad and work for a company based in the United States only have to pay taxes in their country of residence. Another strategy is to keep all of your receipts and invoices for your expenses. This will make it easier for you to verify your expenses when it comes time to file your taxes, and it will help to ensure that you’re claiming all of the deductions and credits available to you. As a remote worker, you may also be able to claim deductions for certain expenses related to your work.

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This can foster efficiency and even allow for more personal interaction where colleagues are in different locations and ordinarily would speak by telephone, particularly during the busiest times. “If you’re moving state to state, talk to your tax professional, let them know your situation and then they can better advise,” Obih says. This can give you peace of mind knowing that you’re in compliance with local and state tax codes and won’t have issues at the end of the year or even years down the road. Tax preparation software can give you an affordable way to streamline your taxes.

Physical office locations are often designed to maintain client confidentiality. They generally have locking offices, separate conference rooms, and staff training in maintaining confidentiality — all difficult to replicate remotely. Outside the office, it becomes much easier for confidential information to be inadvertently — or purposefully — seen or overheard by the wrong individuals.

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Remote workers must pay local and state taxes even if their employer is in a different state. Independent contractors that move from one state to another while working remotely from the same employer must how companies benefit when employees work remotely establish a domicile or obtain a permanent residence to avoid double taxation. Remote workers who don’t live in the state where they work don’t have to file taxes in both states if they work from home.

  • Whether you’re new to remote work or have been working remotely for some time, this guide will provide you with the information you need to stay compliant and optimize your tax situation.
  • On the same poll, providing training to managers on leading virtual teams was one of the topics on which employers and employees disagreed on the success of to the greatest extent, second only to extending childcare benefits.
  • If you have a space in your home used solely for business, you can deduct your expenses with either the simplified option or the regular method.
  • As a remote worker, you may be able to deduct certain expenses related to your home office, such as the cost of utilities and internet service.
  • You can’t just claim a deduction for your fancy new kitchen table by putting your work laptop on it.

It all depends on the states in question and what their respective tax rates are. One thing you need to know — before you panic — is you can’t be taxed double on your income just because you did your job from two states. Of course, no matter what, you’re generally required to file a tax return in the state you live in. So if you live in Pennsylvania, for example, you can bank on having to file a Pennsylvania tax return for 2021.

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