Tax Considerations for Remote Employees

The number of remote workers in the U.S. has increased significantly since 2020. Many companies are also offering a flexible work schedule that allows employees to work from home multiple days per week. With this shift to remote working comes additional tax considerations for both employees and employers.

Below, we summarize four factors that Charles Schwab recommends people take note of before the next tax season.

  1. Withholding tax from wages
    • The flexibility of working from home has allowed some employees to move out of state. Regardless of an employee’s new location, they are required to have taxes withheld in accordance with their state’s tax rules, regardless of where the company is located.
    • Some states, such as New York, require companies to withhold taxes from nonresident employees’ wages.
  2. Filing returns in multiple states
    • Employees that work in more than one state may be required to file a tax return for each state. If you live or work in one of the nine U.S. states that do not charge income tax (Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming) you won’t be required to report and pay income tax to that state.
  3. Deducting business expenses
    • The Tax Cuts and Jobs Act of 2017 prevents unreimbursed business expenses from being tax-deductible through 2025. This means that any out-of-pocket expenses that were not reimbursed by your employer cannot be deducted from your taxes.
  4. Employing workers in multiple states
    • If your business has employees in multiple states, you may be expected to register your business in each of those states. You may also need to pay taxes and file tax returns in those states.

SST Accountants & Consultants encourages you to contact an expert to help ensure that your organization is up-to-date on all the tax-related nuances that remote workers bring with them.

For additional information on taxes for remote employees, refer to this article from MHM CPA.