By coinnews 
00:00 Speaker A
In 2024, over 35 million Americans worked remotely representing nearly a quarter of all US workers. And if you’re one of them, your taxes might look a little different than those for in-office workers. Here to help make sure your returns are mistake-free, we’ve got Andrew Gordon, Gordon Law Partner, and tax attorney and CPA. Andrew, good to see you. If you work in a different state than you live, how do you determine where you owe taxes?
00:35 Andrew Gordon
Well, gosh, Brad, great question, and thank you for having me. Always a pleasure to be here and talk about taxes. And the tax code is already very complex. It takes basically an attorney and a CPA to understand it. But an area that’s gotten even more complex since COVID are the state tax rules. And that’s because a lot of people nowadays are working remotely. And what that means is that you might be working in one state and your employer may be in a completely different state. And in our income tax system, there are two levels of taxes. There are typically federal taxes, which impacts everyone, and then state taxes. And depending on your state, you may be paying state taxes as well. Now, the factors vary, and that’s the problem. That’s what makes it even more complex. Not only might you be paying taxes where you reside. In fact, you typically will, if your state collects taxes, but you may also be paying taxes where your employer is located as well. And that’s because after COVID, more and more states have started to pass what’s known as the convenience of employer rules. And so states like New York, Nebraska, if your employer is located there, even if you’re working remotely, you may still pay taxes in that state. And so we see all the time, clients that get caught by surprise because they have this additional state tax obligation. So it’s something to be aware of right away.
02:29 Speaker A
Are there any ways to avoid being taxed by multiple states in that situation?
02:35 Andrew Gordon
Yeah, Brad. I’m I’m glad you asked. I’m not here just to rain on everyone’s parade, but there are also ways that you can eliminate or reduce this tax bite as well. A lot of states have what’s known as reciprocity agreements. So if you pay state taxes where you reside, it can also apply to the states of your employer. In addition, if there is no reciprocity agreement, most states allow you to take credits for taxes paid in other states. And this acts to basically eliminate the double taxation. What you end up doing in many situations is paying the tax of the higher state, but you often don’t have to pay double tax overall. Now, you do have to file with both states. Another way to avoid this is to establish domicile or residency in a non-tax state. Uh, there’s more and more states that are now becoming non-tax, no income tax. In fact, Mississippi, just yesterday, passed legislation passing, uh, repealing their income tax.
04:05 Speaker A
So, when it comes to deductions then, how do you figure out what you can qualify for if you are working from home?
04:18 Andrew Gordon
So, deductions also more and more complex nowadays, the tax cuts and jobs act, something you might have heard me talk about before, eliminated a lot of the deductions that impacted employees. And so, for example, you can’t take a deduction as an employee for non-reimbursed expenses. You used to be able to. Um, and so as the tax cuts and jobs act comes up for votes again in the coming year, it’s something to pay attention to. So a way to act and still get this is through employer reimbursements. So have a conversation with your employer and see if maybe you can adopt a reimbursement plan so that certain expenses, home office use, other types of expenses could be deducted by your employer and non-taxable to you as well.
05:21 Speaker A
And so what if you are an employer with workers in multiple states? What do you need to do in that instance?
05:31 Andrew Gordon
Yeah, so there’s different things that you need to be aware of. It’s not as simple as just having someone in those states. You typically need to register with the tax authority of each state where you have employees. Not only do you have to register, but you also have to withhold taxes, and this could be not only state taxes, but sometimes even local taxes as well. And then finally, a third prong to be aware of is unemployment taxes. Many states require that you pay unemployment insurance towards unemployment, even if you have one employee in that state.
06:12 Speaker A
Andrew, great to see you. Thanks so much. The clock is certainly ticking here towards that tax day. We appreciate it.