If I Work Remotely, Where Do I Pay Taxes? A Complete Guide

There is a huge difference in working on-site and working remotely, sometimes as an outsourcer and sometimes as a self-employed worker, no matter both the cases submitting your taxes is a crucial specially when you are working as an employee no matter remote or on-site. Always know the importance of how and where to apply for your taxes.

Where Is Income Taxed?

Normally, Income tax is solely based on two basic factors:

• Your state of residence
• The state where you are working and earning your income.

In this case we are talking about remote workers, then the scenario becomes that your taxing will be done by the residence of your state and potentially in the state where your employer works/lives.

How Are Remote Workers Taxed?

Step 1: Identify Your Tax Residency

• Your primary state of residence is usually where you live most of the year.
• This is where you’ll likely file your state income tax return.
• If you move during the year or split time between states, you may be considered a part-year resident in multiple states.

Step 2: Understand Your Employer’s State Tax Duties

• Some states may withhold income tax based on where the employer is located, even if you’re working elsewhere.
• If your employer is in a “convenience of the employer” state (like New York or Pennsylvania), they might withhold tax based on their state, unless you’re working remotely out of necessity.

Step 3: Check for Exchange Agreements

• Some states have exchange agreements that allow residents of one state to work in another without paying income tax to both.
• For example, if you live in New Jersey and work in Pennsylvania, you may only need to pay NJ taxes if an exchange agreement exists.

Step 4: Update Your State Tax Withholding Forms

• Use your employer’s payroll portal or HR department to submit the correct state tax withholding forms (e.g., Form W-4 for federal, and relevant state forms like NJ-W4 or CA DE-4).
• If you live in a different state than your employer’s office, you may need to submit multiple forms.

Step 5: Track Your Work Locations

• If you move or travel while working, especially in different states, log your time in each location.
• Some states (like New York) track the number of days worked in the state to determine your tax liability

Step 6: File State Income Tax Returns

• A resident return in your home state
• A non-resident returns in your employer’s state or other work states

Step 7: Pay Self-Employment Taxes (If Applicable)

If you’re a 1099 contractor or freelancer, you’re responsible for:

• Income tax
• Self-employment tax (covers Social Security and Medicare)

Step 8: Determine Local City/County Taxes

• Some jurisdictions (e.g., New York City, Philadelphia) also levy local income taxes.
• You may owe local tax even if you don’t physically work in the city, depending on where your employer is based.

Step 9: Explore Home Office Deductions (If Self-Employed)

W-2 remote employees generally cannot deduct home office expenses. Self-employed individuals may be able to deduct:

• Home office square footage
• Utilities
• Internet
• Office furniture

Step 10: Consult a Tax Professional or Use Tax Software

Multi-state taxation can get complicated fast. Professional tax consultants are your best options and choice:

• Navigate dual residency
• Determine correct withholdings
• Avoid penalties

How Can Remote Workers Pay Taxes? (Without Losing Their Mind)

Whether you’re fully remote, working across state lines, or logging in from a beach in Bali, this guide breaks down how remote workers can pay taxes clearly, calmly, and legally.

Step 1: Understand Where You Owe Taxes

The golden rule of remote work taxation:

“You pay taxes where you live and sometimes where you work depending on the state.”

There are three major factors:

1. Your state of residence (where you live most of the time)
2. Your employer’s location
3. Where you physically perform your work

Example:
You live in Colorado, your company is based in California, and you’re working from home.
You may owe Colorado state tax because you live there and are performing the work there but California may still expect a slice of your paycheck unless rules say otherwise.

Step 2: Figure Out Your “Resident” vs “Non-Resident” Tax Status

What is a resident return?

You file a resident state return in the state where you live.

What is a non-resident return?

If you worked in a different state (or your employer is based there and the state enforces certain tax rules), you may also need to file a non-resident return.
States like New York, Arkansas, and Pennsylvania follow the “convenience of the employer” rule. That means if your employer is there, they may still tax you even if you never step foot into their state.

Step 3: Make Sure Your Employer Withholds the Right Taxes

Your employer handles your federal tax withholding (thanks to Form W-4), but state tax withholding can get tricky.

If your employer:

• Is in the same state as you great, they’ll likely withhold your correct state income taxes.
• Is in a different state they might be withholding for their state, not yours.

Solution:

• Submit a state-specific withholding form to your employer (e.g., a New Jersey W-4 if you live in NJ).
• In some cases, you may need to manually adjust or pay estimated taxes if your state isn’t being withheld.

Step 4: Pay Estimated Taxes (If You’re Self-Employed)

If you’re a freelancer, contractor, or self-employed remote worker, nobody’s withholding taxes on your behalf.

• Federal income tax
• Self-employment tax (Social Security + Medicare)
• State income tax (if applicable)

How to do it:

• Calculate your quarterly taxes using IRS Form 1040-ES
• Pay via the IRS Direct Pay portal or your state’s tax website
• Don’t forget city/local tax if your jurisdiction has it!

Use a budget friendly and trust worthy service for your tax submission like BitAccounting so you can manage work easily.

Step 5: International Remote Workers, You’re Not Off the Hook

Working from a mountaintop in Switzerland while employed by a U.S. company? Cool but taxes still apply.

Here’s what you need to know:

• U.S. citizens must report worldwide income even if living abroad.
• You may qualify for the Foreign Earned Income Exclusion (FEIE) using Form 2555.
• You may also claim the Foreign Tax Credit (Form 1116) if you paid taxes to another country.