How Do I File Taxes If I Work Remotely?

Traveling to another country and working for an extended amount of time seems like a simple process, but it requires some planning and almost always a visa. Or just hand it off to a dedicated tax expert to do your taxes from start to finish.

  • International employees may actually lose money after their portion is exchanged for their local currency.
  • Ten states have a flat income tax, and nine states have no income tax at all.
  • On the other hand, some jurisdictions haven’t adopted tax allowances for remote employees at all, despite many still working from home.
  • For remote workers, having to prepare taxes for 2021 can be a daunting task.

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. Choosing the right model to connect people, process, and technology will help you deliver more strategic value for your business. The pandemic tested the flexibility and responsiveness of work and culture everywhere. Since the disruption, hybrid and remote-working models have become the norm more quickly than anyone envisioned pre-pandemic, for example, 78% of tax leaders say that they are here to stay1.

Pay, Tax, And Work Laws For Remote Employees

“There are certain states and certain situations where you could be double taxed.” Many people have used the relative freedom of not needing to report to the office to live somewhere else for a time. They’ve moved in with family during the pandemic, moved to less crowded or less expensive areas, or tried a “workcation” for a chance of scenery.

how do taxes work for remote employees

One of the most important things in properly filing taxes as a remote worker is enlisting the help of a qualified tax professional to assist in filing. Given the ever-changing tax landscape, this may not be the year to rely on free tax software. In these uncertain times, it’s essential to educate oneself on the changing tax rules and prepare for filing, giving plenty of time before the deadline. After the How Remote Work Taxes Are Paid “End Date,” employees will have to evaluate their current working situation and apply existing Pennsylvania tax laws. You may be eligible to make deductions pertaining to your home office, including a percentage of your rent, utilities, internet, and phone. However, if you receive an allowance from your employer to cover these expenses, that is a taxable benefit that must be declared on your return.

Help Your Customers Onboard Global Talent Using The Remote Api

Nothing can give your business the same advantage as having access to global talent. Even if they’re based in the same country as you, you might have to follow specific rules if they live and work in a different state or region, as is the case for the US.

Setting up payroll and taxes for remote workers may be the most complicated part about hiring a remote team. But the obstacles are easy to overcome when you have the right tools and processes in place. Cloud-based HR services like Gusto and Zenefits take into account all the tax and payroll laws of where your remote employees live. Their single platforms help you run payroll, manage benefits, and support your remote team. If your employee works in the same state your company is registered in, you’ll withhold state income taxes and pay state unemployment insurance tax in this state.

Preparing To File Taxes As A Remote Worker

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how do taxes work for remote employees

On a general level, workers in the US owe two main types of taxes—income and payroll . Additionally, TransferMate integrates with the most popular accounting and payroll software, so it’s even easier and faster to pay your remote team with it. Some companies choose to use platforms like Upwork to pay their employees, even if they don’t hire through them. If you only have a handful of employees and they are not full-time workers, all it takes is setting up payments with your bank. It also includes the employer’s responsibilities around withholding, filing, and depositing various taxes with the respective state or federal authorities. In any case, choosing the structure of your relationship with remote workers should not be a matter of just picking the arrangement that is simply the easiest for both sides. Moreover, this article is meant to serve as an overview—there are way too many edge cases depending on where your company is based (state and country-wise) and where your employees live (again, state and country-wise).

Tax Tools And Tips

Washington has various state tax withholdings, and Seattle has various local tax withholdings. John’s company has to withhold state and local income taxes for Washington and Seattle from his pay. It also means John’s company will have to pay Seattle unemployment taxes.

  • You will have to register as self-employed or as a freelancer in your home country and pay the income tax (and any other work-related taxes) there.
  • This can lead to complicated tax issues, but with a little extra knowledge (and the help of S.H. Block Tax Services), you can get the most out of your out-of-state remote work tax return.
  • Taxes make up just one part of the enormously complex equation of working and hiring internationally.
  • As a result of that, it’s interesting to take a look at how that could affect convenience rules.

Their base plan is $8 per month per employee, with an additional $6 per month per employee for payroll services. Exchange rates are another thing you need to consider with international workers. Most banks offer terrible exchange rates which can cost an awful lot. This is where using someone like Wise or TransferMate can really help keep costs low.

Lives Out Of State And Works From Home

Given the growth in popularity of remote work, it’s very possible that tax law could change in the next few years to accommodate the changing workforce. Several bills under consideration would change the way remote workers are taxed based on their location. The Remote and Mobile Worker Relief Act of 2021 would not let states tax or require withholding on nonresident employees who are in a state for less than 30 days. A similar bill called the Mobile Workforce State Income Tax Simplification Act of 2021 is pending in the U.S. Remote work has become more common in recent years, and the COVID-19 pandemic has resulted in employers realizing that many jobs can be done from home. Some remote workers even work in a different state than where their employers are based.

Income tax rates vary widely throughout Ohio municipalities with some cities not assessing income tax at all. Based upon the Ohio Municipal Tax Rate Table, approximately 7% of municipalities have rates 1% or lower.

Tax Tips For Remote Companies

They allow you to send money at the market exchange rate for a low flat commission. This is the main reason why international candidates are most often hired as contract employees, not full-time company employees. Once they register as self-employed business owners or freelancers, they’ll handle all their international tax liabilities on their own. That’s because most countries will require you to open a local branch of your company in that country. Then you’ll need to follow all the local laws regarding minimum pay, benefits, and more for your team members there. Not having to worry about payroll taxes is just one reason why so many companies choose to hire freelancers for remote work.

There, employees only need to be working from home at least five days a month. Justworks helps businesses with their benefits, payroll, and everything else they need to take care of their team. The Scoop is your go-to resource for staying up-to-date on federal and state employment laws and regulations. From an employee perspective, the lack of a commute provides more time in the day as well as cost savings, and there can be a liberating sense of autonomy in the remote workplace. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


When you consult a professional, you’ll gain the peace of mind of knowing you’re doing everything right. Even though you can use many of the same options to pay your team abroad, there are two significant considerations to keep in mind. Keep in mind that this is not just about travelling and experiencing different cultures and having a broader professional experience and background. There are legal obligations to follow to avoid some negative consequences.

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