What Working Remotely From a Different State Will Do to Your Tax Return
If your job is located in another state, but you are working from home due to COVID-19, you might be wondering how this will affect the reporting of your 2020 taxes for both states. For example, if you work in New York, but live in New Jersey, you might be questioning if your total income earned while working remotely is considered only in New Jersey or if your total pay is still considered just New York income.
When you are a resident of one state and work in another, your income is taxed in both states because the income you receive is always taxable to your resident state. However, you are given a tax credit in your resident state, New Jersey, for any taxes paid to a non-resident state for income you earn while physically working in that state. Therefore, last year, if you worked entirely in New York City, the income you earned there was taxed by New York. New Jersey gave you a credit for those taxes against your New Jersey resident taxes.
Under the current circumstances, it is believed that the convenience rule was going to be suspended due to COVID-19, since you are working remotely at the employer’s request and not for your own personal convenience.
New Jersey has announced that they will not be looking to tax remote workers as having earned the income in New Jersey. To take precaution, we recommend that you accurately track how many days you are physically working in each state to properly file your tax return as the further advisement comes.
If you have any questions, please contact one of our tax professionals at (973) 298-8500.