Work Remote During Covid? You May Have to File Taxes in a Different State
Millions of Americans worked remote in 2020, and many moved to an entirely different state to do so. I heard numerous stories of New Yorkers heading to Montana or Idaho to escape the city during Covid, and to enjoy lockdown in the mountains. Sounds dreamy.
But there may be a catch, and that catch involves something everyone dreads: taxes.
Indeed, for workers who chose to move temporarily to a different state during Covid-19, you may have to file income taxes for that state and your home state, assuming you worked in both during the year. For many, this is unwelcome news, and it means filing 2020 taxes may have gotten even harder.
States have different tax rules, so if you worked in more than one in 2020, your first task is to find out what each state's rules are with regards to income and taxes. Just about every state that has income taxes will charge workers who are "passing through," so there's a decent chance you will have to file multiple state returns if you moved around. But there are several exceptions in 2020, given the pandemic.
About 15 jurisdictions, like Maryland, Virginia and Washington D.C. a, have agreements with neighboring states allowing commuters to file and pay taxes where they live. Other states may not have income taxes at all, like Tennessee or Texas, so filing in that state may not mean owing any additional money. In some cases, a remote worker could save money for 2020, if you left a high tax state for a low tax state, and the high tax state allows you to credit taxes you pay in another state.
Here's a helpful guide for finding out what your state's rules might be: https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/coronavirus-state-filing-relief.pdf. But the bottom line -- it may make sense to work with a CPA for 2020 filing if you worked in multiple states. Doing so could save you money.
Contributor
Sergey Savastiouk, Ph.D. has a degree in Applied Mathematics from Moscow University and has extensive experience as an entrepreneur, investor, manager, and mathematician. His professional expertise is in applied mathematics, mathematical modeling, system and pattern analysis, and software and hardware system integration. He has served as the CEO of several hi-tech start-up companies and nonprofit organizations, which has given him proven capabilities in business strategy for high-tech start-up companies, market assessment, company formation, team building, product development, marketing, and sales. He has published numerous articles in journals and magazines on related fields. As a retail investor, he spent 15 years developing his proprietary trading and quantitative algorithms (now Tickeron’s A.I.), which brought him significant returns in trading the stock market. His current work and goal in founding Tickeron is to bring professional, sophisticated stock market analysis capabilities to retail investors via an easy-to-use interface.
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