Easily Avoid Paying Double the Tax Burden When You Need to Work in Two States
March 2020 was the year that working remotely suddenly became a choice for hundreds of thousands of Americans. People lost their jobs when working in an office became impossible. Due to quarantine mandates, people were forced to search for remote jobs where they had to work from home. In many cases, this meant living in one state, but working remotely in another state. This may lead to some confusion about how to file income taxes for two different states. In this blog, we’ll be discussing what income taxes you’re required to file for when working remotely in a different state.
Which State Do You File Taxes In If You Work and Live in Two Different States?
The answer to this question is that it varies depending on the state you live in. The general rule of thumb is that you pay non-resident taxes in the state that you work, and resident taxes in the state that you reside in. However, because of the amount of exceptions each state has, it is best to research your state laws.
Alaska
Florida
Nevada
South Dakota
Washington
Wyoming
Tennessee**
Only Tax Dividends and Interest Income
New Hampshire**
Only Tax Dividends and Interest Income
File Your Taxes
States That Work Together, Do Not Tax Together
There are few states that have what the government calls Reciprocal Tax Agreements. This basically means that states have an agreement not to double tax you for being a resident in one state and a non-resident in the other. If you work in Arizona, for example, but you live in California, you do not need to pay non-resident taxes to Arizona because of the agreement. Each state has their own Reciprocal Tax Agreements (RTA) so be sure to speak with a tax preparer to determine how you should file your return.
States that have reciprocity agreements
Graph is from Turbo Tax
States that have reciprocity agreements
Graph is from Turbo Tax
| If you're a resident of... | and you work in... | Submit this exemption form to your employer |
|---|---|---|
| California, Indiana, Oregon, or Virginia | Arizona | WEC |
| Anywhere other than District of Columbia | District of Columbia | D-4A |
| Iowa, Kentucky, Michigan, or Wisconsin | Illinois | IL-W-5-NR |
| Kentucky, Michigan, Ohio, Pennsylvania, or Wisconsin | Indiana | WH-47 |
| Illinois | Iowa | 44-016 |
| Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin | Kentucky | 42A809 |
| District of Columbia, Pennsylvania, Virginia, or West Virginia | Maryland | MW 507 |
| Illinois, Indiana, Kentucky, Minnesota, Ohio, or Wisconsin | Michigan | MI-W4 |
| Michigan or North Dakota | Minnesota | MWR |
| North Dakota | Montana | MW-4 |
| Pennsylvania | New Jersey | NJ-165 |
| Minnesota or Montana | North Dakota | NDW-R |
| Indiana, Kentucky, Michigan, Pennsylvania, or West Virginia | Ohio | IT-4NR |
| Indiana, Maryland, New Jersey, Ohio, Virginia, or West Virginia | Pennsylvania | REV-419 |
| District of Columbia, Kentucky, Maryland, Pennsylvania, or West Virginia | Virginia | VA-4 |
| Kentucky, Maryland, Ohio, Pennsylvania, or Virginia | West Virginia | WV/IT-104 NR |
| Illinois, Indiana, Kentucky, or Michigan | Wisconsin | W-220 |
States that Do Not Work Together, Tax Together
In states that do not have an RTA with other states, you will need to file taxes for both states. Generally, you get the same results as states with the reciprocal agreement. You may claim a tax credit from your resident state on your tax return to avoid being taxed twice. The agreement only mitigates the need to file two tax returns, but you still end with the same result if the file is done correctly.
Traveling Exceptions to the Tax Rules
Taxpayers that travel very frequently such as professional athletes, military members, and truck drivers.
- Professional Athletes pay what is called a “Jock Tax”. They are responsible for paying taxes in specific states based on the number of days spent in that state.
- Active Military Members are only taxed in their state of residence while they are serving outside of their state.
- Truck Drivers are only taxed in states where they are living. No matter how long they are away from their place of residence, as long as they can prove their connection to the state, the Amtrak Act allows truckers to only be taxed in their place of residence.
We Can Help
America’s Choice Tax offers a variety of tax relief services for you. Nearly no tax debt is too big for us to handle. Call us today to find out how you can relieve thousands of dollars in tax debt, We’re here to help you get back to your normal life.