In specific cases a remote worker’s resident state may not provide a credit for taxes assessed in the employer’s state because the income is actually earned in the state of residence, Edward Zelinsky, a tax professor at Yeshiva University’s Cardozo School of Law, told FOX Business.
Zelinsky wrote in a recent note that the Supreme Court has indicated that under certain circumstances states must offer credits for taxes paid in non-resident states, but it is not clear whether the statute applies to a teleworking situation where wages are earned in the resident state.
Timothy McGrath, managing partner at Riverpoint Wealth Management, told FOX Business that double taxation, which has traditionally been faced by athletes and people employed in a few select professions, is likely to be more prevalent.
“I think this is becoming more and more popular … a bigger and bigger issue,” McGrath said.
According to the most recent data from the Bureau of Labor Statistics, about one-quarter of workers said they were teleworking as of August.
And as previously reported by FOX Business, some of these individuals may be faced with a number of other challenging tax situations when they go to file their income returns next year.
Other novel tax filing situations that may face workers include having to file multiple state income tax returns for the first time – and potentially owing more, even if given a credit in their state of residence. The latter scenario can happen if taxes are higher in a nonresident state where they are owed.
People who are working under different circumstances may want to contact their human resources or payroll department to let them know what has changed. That’s because the state where your employer is having your taxes withheld may need to be adjusted – a situation that could pose a problem for both you and your employer if it is not corrected by next year.