The Must-Know Tax Implications for Working Out of State

by | Nov 18, 2020

During the pandemic, many of us fled home to find refuge in other places. Some moved in with mom and dad for a while. Others escaped to the safety of their secondary residences or vacation homes. Some got permission to work from anywhere in the country — and now find themselves working in states far from home. No matter the situation, if you’ve worked in another state outside of your own, there could be tax implications — important ones that you must know. Be savvy and not surprised come tax time. Here are answers to some FAQs on the subject:

I only worked out of state for a couple of days, so it doesn’t matter, right?

 

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It might. There are a few states that tax people who worked there for as little as just one day. Anytime you work in one state but live in another, it’s possible that you’ll have to pay tax on your salary to both states.

Is there any tax reprieve for people who work in multiple states?

Several states offer credits for taxes paid to others. However, if your relocation state doesn’t have any reciprocity agreement with your primary residence state, then you may have to pay state taxes for both. The rules are complex and vary from state to state, so check with your accountant.

What should I report to my accountant if I worked out of state?

Take a look at your calendar and count up how many days you worked in each state. Armed with the days you worked in each, your accountant can determine your tax liabilities, if any, for each one.

I worked out of state, but who’s going to know?

Don’t take the chance. Everyone knows that auditors are tenacious. If you get audited, they’ll want data. They’ll want to know exactly how many days you’ve been in each state. Don’t be surprised if they check your phone records, credit card usage, travel records, where your kids go to school, and more.

Are there any states that don’t tax relocated workers?

Yes. According to the Association of International Certified Professional Accountants, 13 have promised not to tax workers who temporarily moved there due to COVID-19. These include Alabama, Georgia, Illinois, Indiana, Massachusetts, Maryland, Minnesota, Mississippi, Nebraska, New Jersey, Pennsylvania, Rhode Island, and South Carolina.

2020 has been a year like none other — and it’s not over yet. Many of us had to change the way we worked during the pandemic — especially nonprofit organizations. Are you one of them? If so, and you’re struggling to navigate the 2020 tax and accounting processes, we can help. Nonprofit accounting is our specialty, and we’ve helped hundreds of organizations save time and money with theirs. Let’s schedule a call to see if we can help you too.

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