About 26% of Americans worked remotely in 2021, and all indications show that these can only increase. Remote working is now an option. If you work from home or have remote workers this year, you must evaluate your tax situation. And how to file your taxes while working online will be a big question.
We make this easier for you to ensure that you do not get into any problems now or in the future. But first things first!
Remote workers are individuals employed and work for businesses from geographical locations outside their official worksites. Also known as teleworkers, remote workers accomplish all their tasks from home or alternative workspaces.
According to the government’s taxation laws, teleworkers do not include employees temporarily working outside their company offices due to the pandemic or other short-term reasons. Thus, the law officially recognizes those employed to work remotely on long-term without the option for working from employers’ offices.
The convenience rule necessitates that all workers are liable to income tax from their states of residence; the same applies to remote workers. As a result, the convenience rule gives city dwellers an advantage when migrating to rural or suburban areas.
However, every official teleworker needs to file personal income taxes like everyone else does – to the state of residence. Of course, this applies to both 1099-NEC contractors and W-2 employees.
Precisely put, you will file all your income taxes to your state of residence irrespective of the official location of your employer. You will report this as resident tax returns. But if your W-2 form has a state listing different from your current state of residence, report your taxes to the listed state as non-resident tax returns. Your resident state will, in turn, give you credits for income taxes paid to other states.
Ideally, you are not eligible for home office deductions on your tax returns if you often receive a W-2 from your employer. Workers under this category are also not qualified for educator expenses, union dues, and meal disbursements, among others. However, those who receive a 1099-NEC are still eligible for these deductions.
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