Working from outside California for x days: do I have to pay taxes in the other state?

Personal Finance & Money Asked on December 28, 2020

I’m domiciled in California, my employer’s headquarters are based on California, my work office is in California and I typically work from California. If I go outside California and work from US State y for x days, am I supposed to pay state taxes in state y? Supposed that I’m either a US citizen or a US lawful permanent resident.

2 Answers

There are two answers to this question:

  • Before COVID19. Each state sets their rules. There is no standard answer. If you make a ton of money, like a professional athlete, X days can be as low as one for some states. For people with normal rates of pay X can be almost anything. If there is reciprocity between the states you could work everyday in state Y and not impact your taxes, in other cases it could be a matter of a few weeks in the other state.

  • During COVID19. States are realizing this is a problem. Some people are stuck in quarantine. Others are working from home because the office has been shutdown for non-essential people. They may decide to not care this year. Working from home was only supposed to be for a matter of weeks, not months.

I have worked for a company in the past that required us to include the zip code where the work was done that day. If you traveled multiple times to some states, the company withheld taxes for that state and required you to file a state tax form to get it back. It was a nightmare of paperwork for some employees.

Either you employer tracks this, or you are expected to know the rules when you work in multiple states, and are expected to file the appropriate tax forms each year.

Answered by mhoran_psprep on December 28, 2020

Generally, if you are a resident of a state, you are subject to that state's income tax on your worldwide income; whereas if you are a nonresident of a state, you are subject to that state's income only on your income with a source in that state.

So the first question is whether you became a resident (even for part of a year) of the other state during this time. If you did, then you would definitely be subject to that state's tax on all your income during that period. The definition of tax residence varies by state, but I am assuming that since it's a temporary move, you don't become a resident of the state.

The the second question is whether the work income is sourced from that state during the time you're there. Work income is generally sourced in the place where the work is performed. This is a tricky question for remote work, since, in a certain sense, you are performing your work in the other state. This article lists 13 states that have allowed employees temporarily telecommuting to pay tax to the state where the employer is located, but the rules are unclear for other states. The Republican stimulus bill S. 4318, section 403, sections (a)(1)(B) and (a)(6), provide that you have to be present in a state for more than 30 days (or 90 days during 2020) to be subject to that state's tax, but this has not been passed.

Answered by user102008 on December 28, 2020

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