Tips for tackling income tax issues triggered by remote employees

The COVID-19 crisis has brought major changes to the U.S. workforce. Many employers have transitioned their workforces to remote work. Now, employees can work from anywhere with an Internet connection. Many employees have taken advantage of the flexibility by investing in home office spaces, moving to different states, and even traveling the country. What most employees and employers haven’t considered, however, are the unique and complex income tax issues that have arisen with a remote workforce.

Understanding state income tax scheme

Generally, an employee’s home state can tax her income regardless of where the money is earned. She also can be required to file a tax return in her state of employment if different from her home state. In other words, employees may be required to elect tax withholding and file tax returns in both their home state and the state of employment. There are various exceptions to the general rule.

In the age of COVID-19, employees and employers that traditionally didn’t have to worry about the general rules of state income taxes between states may be blindsided by both the employer’s and the employee’s new tax situations: