File Your Taxes Yourself

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File Your Taxes Yourself as a Remote Worker in Multiple States

Those workers who are still working remotely, need to check your tax situation for 2021. It’s quite possible your tax situation may be a lot more complicated than last year. If you file your taxes yourself, you need to be aware of the state rules that may apply to you.

According to a recent survey, about 72% are not at all or very familiar with the tax requirements of their state law concerning remote work. Here’s what you need to know about it. If, during 2021, you have worked as a remote worker at any time, you should find out how it may affect your 2021 state tax return.

Many states had some sort of pandemic related reprieve for 2020 tax returns. If you do your own tax return, that meant you probably had no obligation to file a return if you did some temporary work in their state. However, for 2021, the pandemic reprieve is gone, and new rules are in effect.

Many states have already spread the word that the emergency orders are expired, and there are new rules for 2021. Those who do taxes on your own need to get familiar with the rules for any state you may have worked in, albeit remotely.

A recent Harris poll revealed that of those individuals who were still doing remote type work, about 30% stated they were working in a different state now than where they worked and lived in 2020.

Most of these taxpayers didn’t know what the new state’s rules were as it pertains to remote workers. That could be difficult if you file your taxes yourself.

Different states have their own approach when requiring you to report income in their state. This can and does complicate things for remote workers. The rules for filing a return don’t always mean that you’ll be paying a lot more in taxes either.

Most states offer a tax credit if you paid taxes in another state, eliminating the double taxation effect. There are some states that don’t offer the credit though. Plus, sometimes the credit for taxes paid in another state doesn’t fully offset the tax paid to the other state.

“If you’re an individual who does remote work, you should know that your resident state taxes your wages, no matter where you earned them”, said Gust Lenglet, President and CEO of the HBS Financial Group, Ltd., an accounting and tax preparation firm in Maryland.

Depending on the state (s), It’s possible to have liability for filing a tax return in another state as long as you work there, have earned money there, or even if your company is located there. If you file your taxes yourself, make certain that you check that out.

If all states worked with the same set of rules, it would be easy to do your taxes by yourself. But, unfortunately, they don’t. Some of the states will allow a non-resident to work in their state for up to 30 days without requiring withholding of state taxes. Many other states, begin that requirement on the very first day.

Some others have a threshold that is wage based for applying income taxes, and 9 other states don’t have an income tax at all.

You’ll find states that have reciprocal agreements with each other. What this means is if the state where you live and another state where you are working, have a reciprocal agreement, you’ll only have taxes withheld for the state where you live. As an example, Maryland has reciprocal agreements with Pennsylvania, Virginia, District of Columbia, and West Virginia.

File your taxes yourselfPinTo add more confusion, consider this rule. Delaware, Pennsylvania, Connecticut, New York, and Nebraska impose a test on remote workers, called “convenience of employer”. If the company you work for is located in one of these states, you will have to pay income taxes there, unless your employer needed you to relocate.

If your company didn’t require you to work remotely there, then you’ll have to pay income taxes to the state where your company is located.

It’s very important for remote workers to understand the state laws and filing requirements that may have an effect on you. You don’t want to wait until tax season rolls around to see who, and where you may owe state taxes to. You need to get your withholding set properly and talk with your employer about it.

For those who are self employed, (independent contractor), you won’t receive a W-2, but instead will get one or more 1099-NEC‘s.

This means you’re on your own and no employer to help in deciding what state taxes to withhold. There are several factors that will have to be used, such as where you live and where you earned your money.

In addition, the calculation may be based on the time spent in each state, but the amount earned in each one too. Plus, if you have employees, other factors are used as well.

If you file taxes as self employed, be sure to consider these issues.

The nation’s mobile workforce has grown substantially, and because of this, the Senate is working on a bi-partisan bill that could change the taxation of remote workers. The bill is known as the Remote and Mobile Worker Relief Act of 2021.

It wouldn’t allow states to tax or require withholding on non-resident employees that were in the state for less than 30 days. For the tax year, 2021, it would be 90 days. The House is considering a similar bill.

Another bill in the Senate has to do with the “convenience of employer” rule concerning non-residents. This new bill would limit a states ability to impose that rule. The House, too, is considering a related bill. A few states have already changed their rules concerning remote workers with non-resident status.

As an example, to accommodate remote workers, they are defining the length of time a person would be able to work there before they are taxed. If you file your taxes yourself, or are an independent contractor, tax season might not be as confusing.

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