Are you sure where your pay is actually taxed when you split days between places?

Remote and hybrid setups stayed high after 2020. In August 2024, WFH Research found 12% of full-time employees were fully remote and 27% were hybrid. That mix has led to a patchwork of state approaches and daily traps for pay and withholding.

The AICPA notes there is no single federal remedy; “all 50 states have 50 different ideas.” Generally, your resident state can tax 100% of your income while another state may tax only the days you physically work there.

This article gives clear, step-by-step guidance so you know when nonresident filings start, how to reduce double taxation, and what convenience-of-the-employer rules mean for places like New York.

Ready to learn the simple actions you should take this year to align withholding and avoid surprises?

Why remote work taxes feel confusing right now

Navigating more than 50 separate state systems makes determining where your pay is taxed feel like guesswork.

States set residency, sourcing, and credit definitions differently. Your resident state can tax your worldwide income, while other states typically tax only the days you were physically present.

The result is friction for both you and your employer. Hybrid schedules, travel days, and convenience-of-the-employer exceptions can flip outcomes. Post‑COVID policy shifts added temporary fixes that vary by place and by time.

• You face 50+ distinct systems because each state treats residency and sourcing differently.
• Physical presence usually drives who taxes earnings, but exceptions can apply based on the employer’s location.
• Reciprocity and resident credits help in some pairings, yet many situations still risk double withholding.

Collecting clear information, mapping where you spent days, and aligning withholding or estimated payments will cut confusion at filing time.

Your step-by-step checklist to stay compliant this year

Start this year by mapping every address and calendar day that affects where you owe money. That list is the foundation for deciding whether you file as a resident or nonresident and which forms you need.

Confirm where you live, work, and spend time

List your primary residence and each location where you performed duties. Note approximate days in each place so you can see which state laws apply.

Identify filing states, forms, and deadlines

Check which states expect a resident return and which need nonresident filings. Add city or local filings if they apply and mark due dates in your calendar.

Align employer withholding with your locations

Ask payroll to update withholding to reflect your actual locations. If needed, adjust estimated payments so you don’t owe a large balance at filing.

Track days and keep documentation

Use a calendar, receipts, and VPN/IP logs to document presence. Keep proof of domicile changes—license, voter registration, lease, and bank accounts.

Decide on credits vs. exclusions for international income

If you worked abroad, weigh the foreign earned income exclusion against foreign tax credits. The exclusion requires either the bona fide residence or physical presence test plus a foreign tax home.

“Start early, document everything, and revisit your plan each quarter to avoid surprises.”

1. List residence and all locations with days.
2. Identify filing states and required form deadlines.
3. Update employer withholding and estimated payments.
4. Track proof and keep W‑2s, 1099s, and state forms.

How state income tax works when you live and work in the same state

When your home and your job are in the same state, filing is usually straightforward.

Your resident state typically taxes 100% of your income. That means you file a resident return and report all earnings to that one state unless you also performed duties elsewhere during the year.

Withholding is simpler when address and workplace align, but local levies can still apply. Make sure payroll has your current home address so state withholding and any city or county lines are correct.

• File a single resident return and report all income to that state.
• You usually won’t need a nonresident return unless you worked in another state for part of the year.
• Keep pay stubs and your W‑2 to verify state and local withholding at filing time.
• Watch for business trips or temporary assignments that could create a small nonresident obligation elsewhere.

“Confirm addresses in payroll early to avoid unnecessary withholding from other states.”

When you live in one state and work for an out-of-state employer

If your primary residence is separate from your employer’s office, you must track where you perform duties and when.

If you’re 100% remote and never set foot in another state, you generally file only in your resident state. Exceptions can apply where a convenience‑of‑the‑employer test exists.

When you travel to your employer’s office, those days are usually sourced to that state. That often means filing a nonresident return there for the income earned on those days.

Your resident return still reports all income. You then claim a credit on your residence return for taxes paid to the other state to reduce double taxation.

1. Keep a day‑by‑day log of where you worked, including office visits.
2. Ask HR to withhold for your resident state and add the employer’s state when needed.
3. Check reciprocity; if eligible, submit the exemption so only your home state withholds.

“Track days, update withholding, and save proof of any mid‑year moves.”

States with no income tax and what that means for you

Nine states currently do not tax wage income, and that status can simplify filings if you truly live and earn only there.

The list includes Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

If you live and work only in one of these states, you generally file only federal returns. Local programs or payroll levies may still apply, so confirm with your employer.

New Hampshire and Tennessee historically taxed interest and dividends, but those levies phase out fully by 2025. That change reduces non-wage complexity for residents.

• If you perform duties physically in a taxing state, you may need a nonresident filing for days spent there.
• If your employer sits in a taxing state but you never travel there, you typically avoid that state’s income obligation unless a special rule applies.
• Washington has no wage levy but does impose payroll-related programs like paid family and medical leave for employers.

“Keep clear proof of where you were on each day—short trips can trigger small nonresident filings.”

For the clearest information, track presence, update payroll, and confirm local requirements for your home or residence.

Reciprocity agreements that can reduce double taxation

Reciprocity agreements can keep filing simple when you cross a nearby border for pay.

Some neighboring states let residents be taxed only by their home state even if they earn wages across the line. This often stops nonresident withholding and reduces the paperwork you face at filing time.

Where reciprocity applies and how to claim it

Check whether your resident state and the state where you work have a pact. If they do, you usually give a specific exemption form to your employer so only your home state withholds.

Credits in resident states when reciprocity doesn’t apply

If no agreement exists, your resident state typically lets you claim a credit for taxes paid to the other state. That credit cuts double liability but may not match higher rates or different sourcing rules.

• Keep pay stubs and W‑2s that show where withholding occurred.
• Refile exemption certificates if you move or if rules change mid‑year.
• Example: Many commuters around Washington, D.C., use reciprocity to avoid dual withholding.

“Confirm reciprocity status early and hand the correct form to payroll to stop unnecessary nonresident withholding.”

The convenience-of-the-employer rule explained

A handful of states use a convenience-based test that can shift income sourcing to where your employer operates.

Which states apply this approach? Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New Jersey, New York, and Pennsylvania use the test in some form.

When the arrangement counts as your convenience

If your setup is chosen for your benefit rather than mandated by the employer, those states may treat your pay as earned at the employer’s place. That can create a direct exposure to extra withholding.

New York and double exposure risk

New York often applies the test and can source income to the employer’s location even when you stay in another state. Your resident state may not fully credit that levy, so you can face double taxation.

• Document whether the employer required your location or not.
• Keep day counts, written policies, and HR emails as proof.
• Ask employers to state their sourcing position and, if needed, adjust estimated payments.

“Get clear, written employer language about where duties are performed to avoid surprises.”

Temporary travel, extended stays, and part‑year residency risks

Even a few days away can change your filing picture. Short trips across state lines may trigger a nonresident return if you perform paid duties while there.

Many states source wages to the place you do the job, so a brief visit matters. Some jurisdictions require filings after only a handful of days. Others set higher thresholds. Track each day so you can spot exposure early.

Business trips and day thresholds

Short business trips can create a need to file in another state. Keep logs that show dates, locations, and the purposes of each trip.

Extended stays and part‑year residence

If you spend more than half the year in a new place, that state may treat you as a resident. That can expose not only wages but also interest, dividends, and other income to local income tax.

Be ready to file part‑year returns in both the old and new jurisdictions and to allocate income by the days and sources involved.

“Track days, save receipts, and tell payroll about schedule changes so withholding follows where you actually perform duties.”

1. Log dates and purposes for each trip.
2. Save travel receipts, calendars, and correspondence that show location.
3. Tell your employer about extended stays so withholding can be adjusted promptly.

Hybrid, commuters, and cross‑border workers

Cross-border commuting brings extra payroll steps that many employees miss until filing time. If you live in one place and punch into an office in another, you must check withholding and filing implications early.

Reciprocity can simplify things. For example, Maryland residents who commute to D.C., Pennsylvania, Virginia, or West Virginia may avoid nonresident withholding by claiming the proper exemption.

Unemployment insurance often follows the employee’s state under applicable employment rules. Confirm which state receives SUTA and whether your employer registered where you perform duties.

• Check reciprocity if you commute across a border so only your resident state withholds.
• Without reciprocity, expect nonresident filings and claim resident credits to reduce double withholding.
• Track days at the employer’s office versus at home—sourcing depends on where you actually work.
• Review pay stubs and report multi-state discrepancies to HR quickly to fix withholding.

“Standardize cross-border onboarding so payroll captures the right withholding and SUTA.”

Staying organized will help you and your employer meet multi-state obligations and avoid surprises at filing time.

Employer responsibilities: payroll, withholding, and compliance for remote employees

A single remote hire can trigger multiple state filings and new employer accounts. You must update payroll to withhold federal income, Social Security, Medicare, and FUTA for W‑2 staff.

State registrations, SUTA, and local taxes

Register in every state where your people perform duties so you withhold the right taxes and pay SUTA on time.

Washington shows why this matters: no wage levy but several employer programs such as paid family and medical leave and long‑term care require remittances.

Updating agreements, addresses, and documentation

Keep written agreements that show the employee’s primary location, whether the employer requires that setup, and any reciprocity exemptions.

Capture and verify addresses, primary worksites, and exemption forms. This information supports withholding choices and reduces exposure.

“Document location, update payroll promptly, and use an EOR or PEO for international hires to avoid misclassification penalties.”

1. Register where you have employees and set up SUTA accounts.
2. Align payroll systems to the employee’s current location and update records when moves occur.
3. Maintain clear agreements and collect proof for withholding positions.

Nexus and sales tax: when a remote employee creates tax obligations for your business

An employee’s physical presence can turn a distant state into an active compliance jurisdiction for your business. When that happens, you may need to register, collect, and remit sales taxes there.

Start by confirming whether an employee establishes nexus in the new location. Many states treat payroll presence as sufficient to create nexus. Local cities or counties can add separate levies and filing steps.

• Register for a sales permit in any state where nexus exists before you collect sales taxes.
• Review city and county thresholds because local jurisdictions sometimes impose their own requirements.
• Coordinate billing platforms and ERP settings so you charge the correct rates by destination.
• Keep exemption certificates and resale documentation for qualifying business customers on file.
• Reassess nexus periodically as headcount and your geographic footprint change to avoid missed registrations or over‑collection.

“If you have presence in a state, treat compliance as immediate: register, set systems, and document exemptions.”

Collecting accurate information early saves you time and reduces future penalties. Align payroll, billing, and legal teams so your business meets state and local obligations smoothly.

Federal vs. state: deductions, reimbursements, and benefits for remote workers

Changes since the Tax Cuts and Jobs Act shifted how employees and contractors report business expenses and employer payments.

What changed after the Tax Cuts and Jobs Act

The TCJA removed the unreimbursed employee business expense deduction for most W‑2 staff. That means you generally can’t deduct home office or out‑of‑pocket costs on your federal return if you’re an employee.

If you’re an independent contractor, you still may deduct ordinary and necessary business expenses and may qualify for a home office deduction when you meet IRS tests.

Taxable stipends and many fringe benefits must appear on your W‑2. That increases reported wages and may affect state withholding and estimated payments.

To keep reimbursements non‑taxable, employers should use accountable plans that require substantiation of expenses and returning excess amounts.

• After TCJA, employer reimbursements became vital for covering your home office costs.
• Independent contractors keep deduction options not available to most employees.
• HRAs provide tax‑favored health benefits that can work for distributed teams.

Document business purposes, keep receipts, and ask HR whether payments will be reported as wages.

1. Confirm whether a stipend is taxable before accepting it.
2. Ask your employer about accountable plans or HRAs to reduce taxable income.
3. Keep clear records to support reimbursements and benefit treatment.

Remote work taxes outside the United States

When you take a job abroad, U.S. filing obligations usually follow you. As a U.S. citizen you must report worldwide income and may also owe local income taxes where you live.

The foreign earned income exclusion lets you exclude up to $126,500 in 2024 if you meet tests and have a foreign tax home.

US citizens abroad: filing and the FEIE

To claim the exclusion you must pass either the bona fide residence test or the physical presence test. The physical test requires 330 full days in any 12‑month span.

Bona fide residence vs. physical presence

Bona fide residence needs intent to live abroad for a full tax year. The physical test is calendar precise; flights over oceans don’t count as full days.

Tax home, abode risks, and credits

Your U.S. “abode” can disqualify the exclusion. In Leuenberger v. Commissioner, strong U.S. ties defeated the claim—an important example to study.

• Keep visas, leases, payroll, and travel logs.
• Track 330 full days carefully if you use the physical test.
• Use foreign tax credits and treaties to prevent double taxation.

“Maintain clear records of residence, location, and purposes for each trip to support your position.”

Tax rules remote work: your action plan for this year in the United States

Start the year by turning your calendar into the map you’ll use to prove where you earned each paycheck. That single habit makes it easy to see when a state may expect a return or withholding.

Map your locations, apply rules, and set up withholding

List every place you lived or performed duties and tally days in each. Note where reciprocity or a convenience-based test might shift sourcing.

Tell payroll to withhold for your resident state and any other state where you performed paid duties. If payroll can’t change quickly, plan estimated payments to avoid underpayment penalties.

File resident, nonresident, and international forms on time

Prepare to file a resident return plus any nonresident returns for states where you worked physically or where an employer‑location test applies. Add city or local filings if they apply to your places.

If you had international assignments, choose early between the FEIE and foreign tax credits based on your expected income and local levies. That decision affects which form you submit and whether you’ll owe additional payments.

“Map days, update withholding, and save proof so you pay accurately and avoid surprises.”

1. Map every place you worked this year and tally days in each.
2. Update payroll withholding or set estimated payments if needed.
3. Gather reciprocity exemption certificates, employer letters, and travel calendars.
4. Review deadlines for each state and city; include part‑year filings if you changed domicile.

Make it quarterly: update addresses, confirm withholding, and refresh your day log so you’re ready to file and to pay on time throughout the year.

Conclusion

A short habit—logging days and confirming payroll—will save you time and headaches at filing time.

States vary widely in how they treat income, so expect different outcomes depending on where you spent days and whether a convenience-of-the-employer test applies.

Reciprocity can simplify withholding, but nexus and unexpected filings may arise if your presence creates obligations. Remember the 2024 FEIE cap of $126,500 for foreign earned income when you have international assignments.

Remote workers and in-office commuters both benefit from clear records. Share accurate information with your employer, track days, and structure benefits and reimbursements to avoid surprises.

Use the checklists in this article and, when situations get gray, consult a qualified professional to protect your position.

FAQ

What changed with the new rules for remote workers?

New state approaches and court decisions have shifted how states tax income earned while you’re not in the office. Some states expand sourcing rules, others keep resident-based taxation, and a few apply the convenience-of-the-employer test. That means where you live, where you perform services, and whether your employer requires remote work now affect which state income you owe and where you must file.

Why do taxes for people who work from home feel so confusing right now?

Multiple states updated laws and interpretations at different times, and courts haven’t settled every conflict. Add hybrid schedules, cross‑border commutes, and varying withholding practices, and you get a patchwork of obligations. You may need to file resident and nonresident returns or claim credits to avoid double taxation depending on your locations.

What’s the first thing I should confirm when preparing for filing this year?

Confirm your primary residence, where you actually perform services, and how many days you spend in each state. That basic mapping determines your filing status, withholding needs, and whether you owe tax as a resident, nonresident, or part‑year resident.

How do I identify which states require me to file and which forms to use?

Check each state’s department of revenue website for nonresident and resident filing rules, withholding forms, and deadlines. Common forms include state resident returns, nonresident schedules, and withholding change requests — file on time to avoid penalties.

How should I align employer withholding with the states where I work?

Provide your employer accurate residence and work‑location information and complete any state withholding certificates they request. If you split time across states, ask payroll to withhold appropriately or plan estimated payments to cover shortfalls.

How should I track days in each state and what documentation helps?

Use a daily log, calendar entries, travel receipts, or geotagged work tools. Keep records of flights, hotel stays, client visits, and any employer directives. Good documentation supports nonresident filings and residency determinations if audited.

If I work abroad, how do I decide between the foreign earned income exclusion and foreign tax credits?

Compare the exclusion (which can exclude qualifying foreign earnings using the bona fide residence or physical presence test) with the foreign tax credit that offsets U.S. tax for foreign income taxes paid. Your situation, tax rates abroad, and plans to claim housing exclusions determine which is more beneficial.

If I live and work in the same state, how does state income tax apply?

When your residence and work location are the same state, that state generally taxes your wages as resident income. You typically file a resident return there and report all income, with credits available for taxes paid to other states if applicable.

What if I live in one state but my employer is in another?

Your resident state usually taxes your worldwide income, while the employer’s state may require nonresident withholding if you perform services there. If you never travel to the employer’s state and it doesn’t source income from your activities, you may avoid nonresident tax—unless a state applies the convenience-of-the-employer rule.

Does it matter if I’m fully remote versus hybrid with some office days?

Yes. Hybrid schedules create potential nonresident tax exposure for days worked in the employer’s state. Even occasional in‑office days can trigger withholding or filing requirements in that state, depending on its rules and any reciprocity agreements.

Which states have no income tax and what does that mean for me?

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming don’t impose broad personal income taxes. Living in one of these states may reduce your state filing burden, but you still owe resident taxes to other jurisdictions if you establish residency elsewhere or earn sourced income in taxed states.

What are reciprocity agreements and how do they help?

Reciprocity agreements let residents of one state avoid withholding and filing in another state where they work. If your commute crosses states with reciprocity, submit the proper exemption form to your employer, then report income only to your resident state.

If reciprocity doesn’t apply, can I avoid double taxation?

Often yes. Your resident state may offer a credit for taxes paid to other states on the same income. You’ll usually file a nonresident return where you worked and claim a credit on your resident return to offset double taxation.

What is the convenience-of-the-employer rule and which states use it?

The convenience-of-the-employer rule taxes income based on the employer’s location unless you work remotely out of necessity. States using it include Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New Jersey, New York, and Pennsylvania. Under this rule, voluntarily working from home for your convenience can cause income to remain taxable to the employer’s state.

How does the New York example show double taxation risk?

New York applies the convenience test and asserts tax on income tied to New York employers unless remote work is required. If your resident state also taxes that income, you may face a nonresident filing in New York plus a resident return at home, then claim credits to mitigate overlap.

When does temporary travel or extended stays trigger nonresident filings?

Short business trips usually don’t create residency, but several states use day thresholds for nonresident taxation. Extended stays, repeated work patterns, or establishing a secondary home can lead to nonresident returns or even part‑year residency, exposing more income to state tax.

How do extended stays affect my residency and other income tax?

Long stays can change your residency status and subject you to tax on all income in the new state. States evaluate ties like housing, voter registration, and family location, so prolonged presence plus local ties can trigger full taxation.

What should hybrid commuters and cross‑border workers watch for?

Monitor withholding across states, unemployment tax implications, and which state claims income sourcing. Keep clear records of commuting days and employer location to minimize surprises and ensure proper payroll treatment.

What employer responsibilities should you expect around payroll and compliance?

Employers must register where they have employees, withhold appropriate state income, and handle SUTA and local taxes. They should update payroll records for remote addresses, maintain documentation, and adjust withholding when employees change locations.

When can a remote employee create nexus and sales tax obligations for a business?

If your presence places inventory or solicits sales in another state, it can create nexus. That may require the employer to register for sales tax, collect and remit in that jurisdiction, and handle additional business filings.

How do federal rules differ from state rules on deductions and reimbursements?

The Tax Cuts and Jobs Act limited employee miscellaneous itemized deductions at the federal level. Employers should report stipends and reimbursements appropriately on the W‑2 and follow IRS guidance, while state treatment can differ. Confirm both federal and state reporting rules for reimbursed expenses and allowances.

What should U.S. citizens living abroad know about filing obligations?

You must file a U.S. return and may claim the foreign earned income exclusion or foreign tax credits. Decide between the bona fide residence and physical presence tests, understand tax‑home rules, and track foreign taxes to use credits or treaty benefits where available.

What immediate actions should you take this year to stay compliant in the U.S.?

Map your work locations, calculate days in each state, update your employer on your residence and work pattern, request proper withholding changes, and prepare to file resident, nonresident, or international forms on time. When in doubt, consult a state‑aware CPA or tax professional for guidance.