I know many of you have been reading my series on “We’re all startups now” (that started on Monday), thinking only businesses have been affected by the pandemic. Oh, sure, the pandemic just made you work from home- or, worse yet, left you furloughed.. But, you thought that’s about the total affect on your life from the pandemic.
Except…
If you’ve been working from home, you could be in for a surprise. Sure, not traveling back and forth to the other coast where your company is based was pretty nice. Or, maybe you stayed with mom and dad in Washington State, instead of California which is your normal abode.
But, here’s the surprise. This means you now probably owe taxes to at least two states. Because the cash-desperate states are going to apply the same laws they impose on entertainers and athletes who travel around the States, taxing them on the money made in-state.
Actually, it’s not all the states. Because 13 of them (MA, RI, NJ, PA, MD, SC, GA, AL, MS, TN, IL, IN, MN, and NE) plus DC – and those states that don’t have income tax (like Texas)- are going to let us slide on our tax obligations. (Yes, that means if mom and dad live in Texas, you might luck on state taxes this year.) And, then, there’s places like the DC metropolitan area (DC, Maryland, and Virginia) which have compacts to not tax folks who live in neighboring states.
Assuming you are taxed by two states, it’s not going to be cheap. Because even with a credit for taxes paid to a second state, you still will be paying more money in state taxes that you normally would be doing. Because the new state that is taxing you this year is probably a higher tax state. And, don’t forget that itemizing only lets the first 10K in state/local/property taxes be deductible.
As you can see from the map above, many states (bright yellow) feel entitled to tax your earnings if you spend ONE day in the state. A few states don’t tax you until you spend more time within their borders (tannish yellow). And, others still based their ability to tax you as a function of how much money you made in their state (green).
Start saving your pennies now! The bill comes due next April.
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Sur-prise. I’m fortunate; I live in NY state and was working out of a home office in NY State so nothing would have changed from me as far as taxes. But others, yes, they need to know and prepare. Working from home may become more common than we would have planned for.
Alana recently posted..Red vs White #ThursdayTreeLove
That is good news.
After much thought, I don’t think working from home is going to be a long-term thing. Sure, productivity was up during the pandemic- because we couldn’t work from a coffee shop or a restaurant. Once those restrictions are gone, we are going for find a slew of distractions are going to lower productivity. (Actually, productivity from home employment has been greater than the office- probably due to the lack of distractions- or more likely that folks worked more hours (unpaid) from home.)
Gosh I wonder how many, if any, thought of that! What a bummer, I’m safe, I stayed in my own state of SC.
Martha recently posted..Color of the Day is Turquoise
I have another surprise about this I’ll share next week, Martha.
I simply had no idea about the double taxation problem in USA.Very helpful
We find ways to tax anything that moves- and even if it doesn’t, Dr. A.
ha, like you said, everything and anything that can be taxed, will! Living in CA means we have a close relationship with taxes!!
truly informative.. thank you Roy..
vidya recently posted..Book Review: A Wish in the Dark
Yup! Taxes are ubiquitous, Vidya.
This pandemic has made people know how important it is to have an online business. But I know God will see us through, and we will go back to our normal lives soon. God bless you all.
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Thank you so much for adding to the conversation- and for your visit.