Quick overview
Remote work changed where income is earned vs. where people live. That split can create multistate tax obligations: you may owe taxes to the state where you live (resident taxes), the state where your employer is located, or states where you performed services. States use different tests—domicile, statutory residency, physical presence, and employer‑convenience rules—to decide who owes what. Because rules vary widely, planning and good records are essential to avoid surprises and audits (see IRS guidance and state tax agencies).
Key concepts you must understand
- Domicile: Your permanent home or the state you intend to return to. Domicile generally determines your primary state of residence for tax purposes.
- Statutory (or technical) residency: Many states use a day-count (commonly 183 days, but not universally) or other criteria to deem you a resident for tax purposes even if you claim a different domicile.
- Source of income: States tax wages earned for work performed inside their borders. If you physically work in a state, that state commonly asserts the right to tax that portion of your wages.
- Convenience-of-employer rules: A few states (most notably New York) may tax nonresidents who telework from out of state if the remote work is for the employee’s convenience rather than the employer’s necessity—this can result in taxation by the employer’s state even when you never set foot there for that work.
- Nexus for employers: Employer withholding obligations depend on business nexus and payroll rules; employers may be required to withhold for multiple states when employees work remotely across state lines.
(Authoritative sources: IRS state tax information; Multistate Tax Commission; state revenue departments such as New York Department of Taxation and Finance.)
Typical filing outcomes
- Resident state: You generally report all worldwide income to the state where you are a resident/domiciliary. Most states then allow a credit for taxes paid to other states on the same income to prevent double taxation.
- Nonresident returns: If you earned income physically in another state, you typically file a nonresident return in that state to report that income.
- Part‑year resident: If you moved during the year, you usually file as a part‑year resident for each state where you maintained resident status during portions of the year.
Common state rules and traps (what causes surprises)
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Convenience‑of‑employer rules: New York’s rule is the most cited example—you can be taxed by New York on income earned for work performed outside New York if the employer’s location is in New York and the remote work is deemed for your convenience (NY Dept. of Taxation and Finance). Other states have variations or are evaluating similar approaches.
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Day counts: Several states apply a statutory day‑count to determine whether you are a resident. A short vacation, an extended work trip, or hiring a local contractor can unintentionally increase your state presence.
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Employer withholding errors: Employers unfamiliar with multistate remote working arrangements may withhold taxes only for the employer’s payroll state, not the employee’s resident state—leaving the employee to pay and reconcile at filing.
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Reciprocal agreements: Some neighboring states have tax reciprocity (e.g., between certain Mid‑Atlantic or Midwest states) that lets you avoid nonresident withholding if you file an exemption. These are limited and must be claimed properly.
Practical steps to avoid multistate tax surprises
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Track physical location daily. Maintain contemporaneous logs or digital records showing where you worked each day (home address vs. client sites vs. business travel). Records are your best defense in case of state audits.
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Confirm your domicile and document intent to prove it. Keep evidence of where you vote, your driver’s license, primary bank accounts, utility bills, and where you return after travel.
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Understand your employer’s withholding practices. Ask payroll whether they will withhold for your resident state and for any states where you routinely perform services. If they don’t, you may need to make estimated tax payments.
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Use state credits properly. Most states offer a credit for taxes paid to another state on the same income—claim this on your resident return to avoid double taxation.
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Watch for the convenience rule. If your employer is in a state that applies the convenience‑of‑employer test (e.g., New York), seek written employer confirmation if work is required to be performed outside the employer’s office for business reasons.
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Consider formal residency steps when moving. If you change your domicile, update voter registration, driver’s license, vehicle registration, and notify your employer and service providers. See our guide on [How to Stay Compliant When Changing State Residency for Tax Purposes](
