Remote Work Tax Reform: Improving Tax Mobility and Tax Modernization

In Alabama, the only state where a constitutional amendment would be necessary to repeal federal deductibility, the elimination of deductibility for all taxpayers would best be offset by a commensurate across-the-board rate cut. Through such reforms, policymakers can take the pro-taxpayer intentions behind the ill-considered deduction and turn them into reality. Convenience rules sever whatever tie exists between a tax and the government services it funds. While most taxes (unlike some fees) fund a broad array of services and cannot be understood as a strictly user-pays arrangement, there is at least some connection between the taxpayer and the expenditure of the funds. Taxpayers pay for the governance of the area where they work—a place from which they derive some direct benefit.

remote work and taxes

You may remain ineligible for up to 12 months from the date of the documented performance rating or start of the Demonstration Opportunity, at the discretion of your supervisor. If the employee believes they have a qualifying disability that limits their ability to perform the essential functions of their position, a reasonable accommodation may be requested. Supervisors and managers should visit USDA’s Reasonable Accommodation webpage and consult their servicing Reasonable Accommodation Coordinator for guidance on agency responsibility pertaining to the reasonable accommodation process.

Remote Work & Income Tax Laws

Taxing people who barely set foot in a state, under a vague and inconsistently applied notion that they are availing themselves of the state’s market simply because their company has an office there, is bad tax policy. While, ideally, all states would adopt a threshold of 30 days or more, for purposes of this analysis, we identify as prime candidates for reform those states where withholding is required with less than two weeks of work, or under $3,000 of nonresident income. Only 12 income-taxing states meet or exceed these thresholds, not counting New York, which technically requires 14 days before employers are required to withhold but aggressively requires taxpayers to file after a single day regardless of liability. What follows is a short list, far from exhaustive, of tax reforms lawmakers should consider to align their tax codes for growth and opportunity—in other words, to embrace mobility and modernization. These taxes can include income, gross receipts, sales, and local business taxes, which can affect not only a company’s tax compliance but also financial statement reporting, registrations, data gathering, and documentation. Some states that had pandemic-related moratoriums on tax obligations for remote workers who were traveling state to state, or staying temporarily in certain states, ended those exceptional breaks for 2021.

Since states’ pandemic guidance on temporary telecommuting has long expired, CPAs’ advice will be highly sought after as companies remodel their tax strategies accordingly. Yet the shift from the office building to the home office carries complicated tax consequences for firms and businesses that have yet to fully adapt to this new model of working. Workers who use 1099 and Schedule C forms, as well as sole proprietors, can still take advantage of deductions for their home office setups. Misclassification of employees in this way can lead to massive penalties for the offending companies, both within and outside the U.S.

What remote workers need to know for tax season

Regarding the annual OPM Survey, changing certain positions to remote eligible that were previously designated as telework or office only is a business decision at the discretion of the agency on a case-by-case basis how are remote jobs taxed based upon a business case analysis. By simplifying things, we hope to make the topic of taxes a bit less overwhelming. From a federal standpoint, the United States tax system is relatively straightforward.

  • If you work remotely or have employees who do, this guide can help you stay compliant no matter where you call HQ.
  • If working remotely from another state means double taxation, a remote work benefit is not much of a benefit.
  • While throwback rules were created to avoid the perceived under-taxation of corporate income, they can lead to double taxation and frequently impose tax burdens high enough to make states unattractive for businesses.
  • No, remote workers aren’t normally taxed twice for the state they live in and for the state their employer is based in.

As with many states’ business taxes, the CBT is imposed upon the “privilege of doing business” within the state. Logan is a practicing CPA and founder of Choice Tax Relief and Money Done Right. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. US companies that want to employ an international remote workforce cannot do so directly unless they register a legal entity in a different country or utilize the services of an Employer of Record organization. Your teams are likely to have questions about going back into the office post-pandemic. You need the right policies and infrastructure in place today to support them to take advantage of the benefits they present.

How does remote workers’ state income tax work?

A McKinsey Global Institute analysis of 800 jobs found that the ability to work remotely is highly concentrated in a handful of high-skill occupations and industries, including finance, management, professional services, and information technology. For remote workers in the U.S., physical location remains the determining factor for which taxes workers pay. Employers who hire employees outside their home states must fulfill their duties to withhold state taxes on a state-by-state basis.

remote work and taxes

The employee teleworks 8 days each pay period from her mother’s home in Boise, ID so that her mom can watch her children while she works. As long as the employee reports to their Portland, OR worksite at least 2 times per pay period, they may remain on the higher Portland locality pay table and an SF-52 is not required to change the official duty station. However, if the employee continues to work out of their mom’s home in Boise and does not report to their Portland worksite at least 2 times per pay period, then an SF-52 is required to change their official duty station to Boise. Whether remote workers pay income tax to the state where they work temporarily depends on the duration of their stay. Different states have different guidelines on the length of time that warrants an employee to file a non-resident tax return.

Ensure that anyone you hire has a Preparer Tax Identification Number, or PTIN. Any tax professional preparing income tax returns for compensation needs to have this number. PTINs are relatively easy to come by, so it also behooves you to find a tax professional with credentials or years of proven experience. Look for professionals who belong to prestigious professional organizations or come highly recommended by sources you trust. One of the most important things in properly filing taxes as a remote worker is enlisting the help of a qualified tax professional to assist in filing.

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