Still working remotely? Your 2021 taxes may be more complicated

In fact, if remote work taxes considered to be an employee of a company , you likely don’t qualify. Because of legislation passed in the Tax Cuts and Jobs Act of 2017, employees who receive a paycheck or a federal W-2 form exclusively from one employer are not eligible for home office deductions. And if you plan on spending half the year in another country, be prepared for the possibility of double taxation. The problem comes when dual residency results in double taxation, which can happen for a few reasons. If for example, you declare your domicile to be in one country but reside for over 183 days in another country, then your income may be taxed twice by both countries for the portion of time you lived abroad.

  • Taxes make up just one part of the enormously complex equation of working and hiring internationally.
  • At ADP, we are committed to unlocking potential — not only in our clients and their businesses, but in our people, our communities and society as a whole.
  • This occurs naturally whenever you report a move to the IRS, and will result in you getting taxed for different portions of the calendar year based on where you lived.
  • ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation.

You can’t just claim a deduction for your fancy new kitchen table by putting your work laptop on it. That way you’ll at least have a basic understanding of your tax situation that you can follow in the future. But the freedom that comes with remote work can also cause confusion when it comes to your taxes. Depending on where you’re logging in to work, you may have to navigate tax codes from different states or cities.

Remote Workers’ Expense Reimbursement

A bipartisan bill in the Senate, the Remote and Mobile Worker Relief Act of 2021, would not let states tax or require withholding on non-resident employees who are in a state for less than 30 days . The only exception to this would be if your W-2 lists a state other than your state of residence. In that case, you would file a non-resident return to the state listed on your W-2 form in addition to a resident return to your home state. Your resident state will give you a dollar-for-dollar tax credit for any income taxes you have to pay to the other state.

Remote work allows you to work from anywhere in the world, so many remote workers have become Digital Nomads, working in several countries throughout the year. Sarah never visited the UK, so there is no need to file a UK tax return for this income. And since each employee and remote work situation is different, their experience with labor/tax laws may be a massive advantage for your team. The same options may be available for paying remote employees abroad too. Not having to worry about payroll taxes is just one reason why so many companies choose to hire freelancers for remote work.


You may be taxed by two states on the same income, but receive a credit from one of the states. In the midst of our ever-changing work environment, another topic that’s confusing taxpayers is when and if they qualify for certain home office deductions. Although freelancers and small business owners who work from home have historically qualified for some type of home office deductions, that doesn’t mean the benefit is available to everyone. CountriesColumn 1Countries We Serve Confidently engage talent in 185+ countries with expert insights into local laws and regulations. If you were granted equity and moved to or worked in another country, there are additional specific tax rules that vary country by country that may increase your tax liability.

  • Not in this case, because she did not stay long enough, but if she had stayed for an extended period, she likely would need to.
  • Also, should you perform work onsite with your employer, you could again be subject to tax liability in the employer’s state.
  • Due to the coronavirus pandemic, many people worked remotely for at least a portion of 2020.
  • Here’s what you need to know about out-of-state remote work and your taxes.
  • With all the benefits of remote work, there are some complications as well.

Before discussing taxation, let’s quickly look at a few important words we’ll use throughout this post. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities (collectively, the “Deloitte organization”). DTTL (also referred to as “Deloitte Global”) and each of its member firms and related entities are legally separate and independent entities, which cannot obligate or bind each other in respect of third parties. DTTL and each DTTL member firm and related entity is liable only for its own acts and omissions, and not those of each other. Establish an assessment and approval process, involving the Tax Department, Legal, HR etc.

The Stress-Free Way To Payroll and Taxes for Remote Workers

For remote workers, all of these differing rules mean it’s important to know the state laws that will affect you. Getting your paycheck withholding right is generally a shared responsibility between you and your company, Bannasch said. What adjustments need to be made will depend chiefly on state and local tax laws governing your new residence. More people are working remotely these days and that trend seems unlikely to change even after the pandemic is over. However, it raises the risk of double taxation if employees work in different states from their employers. Here is what you need to know — and what you can do — to prevent a second tax bite.

  • Some countries may bar you from entering for a certain amount of time until you resolve your tax issues.
  • This test requires that you withhold and pay taxes to the state where your organization is located, even if your employees live out of state, if they do so out of convenience.
  • Suppose you become liable for collecting and remitting sales tax for states due to remote work.