Remote Workers Multi State Taxes Avoid Double Tax
- Carla Alviso
- Sep 3
- 16 min read
Updated: Oct 24
Remote work gave many of us freedom to live in one state while working for companies in another. That flexibility can create questions at tax time. Which state gets to tax your wages. Do you need to file in more than one state. How do you prevent paying tax twice on the same income. This guide is written by Alviso, CPA in Texas to help remote employees and freelancers understand residency rules, state reciprocity, the credit for taxes paid to other states, the convenience of the employer rule, and practical ways to adjust withholding and estimated payments so you are ready for 2025 filings. You will also find worked examples and a checklist you can use with your payroll team or accountant.
Table of contents
Do you need to file in more than one state
Remote workers often fall into one of three categories for state income tax. Resident, part year resident, or nonresident. Your resident state is usually where you maintain your home, spend most of your time, register to vote, and have your driver license. Most residents must file a return in the resident state and report all income from everywhere unless the state has no income tax. Part year residents report income for the part of the year they lived there when they move during the year. Nonresidents generally file only when they have income sourced to that state such as wages earned for work performed while physically present there, or income sourced by special state rules.
Many remote employees will file two returns. A resident return in the home state and a nonresident return in another state where they worked or where their employer sources wages. If both states tax the same wages, most resident states allow a credit for taxes paid to other states to ease the burden. The credit method and documentation vary by state. A clear example of how one state handles this is on the Virginia Department of Taxation website at Virginia: credit for taxes paid to another state (VA DOR).
Keep in mind that state income tax filing obligations may arise even if your employer does not withhold for a particular state. Withholding rules and filing thresholds are not the same. Employers follow payroll guidance, while individual filing requirements depend on each state’s tax law. For a national overview of nonresident income tax rules and thresholds, see state income taxes and nonresidents at Tax Foundation.
Reciprocity agreements
Reciprocity is a contract between two states that lets workers pay tax only to their resident state on wage and salary income. If you live in a reciprocity state and work in the partner state, your employer can withhold only your home state tax once you give the required certificate. You generally do not file a nonresident return in the work state for wages covered by reciprocity, although you would still file there for other income like rental income or if you worked in that state outside the agreement.
Reciprocity agreements are limited to certain corridors, especially in the Mid Atlantic and Midwest. The list can change, and the paperwork is specific to each state pair. A reliable national summary appears at state reciprocity agreements and nonresident withholding at Tax Foundation, and you can find common form names on many tax software help pages, such as states with tax reciprocity form list.
Common examples many commuters encounter include the pairs below. Always verify current details and submit the proper certificate to your employer at the start of the year or when your work situation changes.
Without a signed certificate on file, the work state may require its own withholding and you may have to wait until tax filing time to sort out credits and refunds. Submitting the right certificate to your employer early in the year keeps cash flow steady and simplifies your returns.
Credits for other state taxes
The resident credit for taxes paid to other states is the main protection against double taxation for remote workers. The credit applies when you are taxed by both your resident state and another state on the same items of income. The purpose is to let the resident state give relief to its residents by granting a credit, generally up to the amount of resident state tax on that same income.
Key features are fairly consistent across states, but the details matter.
First, most states limit the credit so it never exceeds the portion of resident state tax attributable to that income. If your resident state rate is lower than the other state’s rate, the credit may not fully offset the other state tax. You could still owe the difference to the other state. If your resident state rate is higher, the credit will usually eliminate resident state tax on that income but you would still owe the resident state rate on the rest of your income.
Second, documentation is required. States usually require a copy of the other state return, W 2 showing withholding, and proof of payment if you paid with the return. Virginia provides a clear example of documentation and computation using Schedule OSC at Virginia: credit for taxes paid to another state (VA DOR).
Third, credits are generally computed per state and sometimes per category of income. Wages are usually eligible. Some states do not allow a credit for taxes paid to cities or counties, which is common in certain states. If you work in a city with local income tax, your resident state credit may not cover the local portion unless your resident state law says otherwise.
Consider a simple wage example. You live in Virginia and work some weeks in North Carolina. Your employer withholds North Carolina tax for work days in that state. You file a North Carolina nonresident return for the wages earned there. You also file your Virginia resident return and claim a credit for taxes paid to North Carolina on those wages. If North Carolina’s rate on that income is higher than the Virginia rate, Virginia will cap the credit at the Virginia tax on those wages. That means you do not pay Virginia tax on the same income again, but you do not get a refund of the difference. If the rates are reversed, the credit fully offsets the Virginia tax on those wages.
Remote workers who move midyear should check whether their new resident state allows a credit on part year returns and how the calculation works. Each state has its own part year rules that can affect the credit calculation and the documentation you file.
Convenience of employer rule
A small group of states use a convenience of the employer rule for nonresident wage sourcing. Under this rule, if your employer is based in that state, your wages may be treated as sourced to the employer’s state even when you work from home in another state, unless you can show that your out of state work is required by the employer for a business reason. This is not a federal rule. It is a state law concept used by certain states and it can create tax in the employer state even if you never set foot there during the year.
New York is the most discussed example. New York treats days worked outside New York as New York work days unless the employee works outside New York out of business necessity. Employer evidence can matter, such as a written requirement to work at a specific out of state location for client service, equipment needs, or space constraints. See background discussion at NYSSCPA on the convenience rule and employer withholding materials at NY IT 2104.1 and withholding rules at NY Dept. of Taxation.
Other states that apply a convenience style approach include Delaware and Nebraska. Connecticut applies a similar rule in some cases that can mirror the other state’s treatment. New Jersey adopted relief measures for residents who pay tax to states that apply a convenience rule and has its own rule for certain nonresidents whose home state applies a similar approach. Because these policies evolve, review the latest guidance from the relevant state department of revenue or consult a tax professional familiar with your situation.
Why does this matter. If you live in a state that taxes residents and you work for a New York employer from your home in another state, New York may tax your wages by convenience rule. Your resident state will also tax your wages because you live there. Most resident states will then grant a credit for the New York tax, but the credit is often limited to the resident state tax on that income. The result can be that the higher rate state effectively sets your tax cost on those wages. If you live in a state with no income tax, like Texas, and your employer is in New York, you may owe New York tax on your wages and there is no resident credit because Texas does not tax personal income.
State policy on remote work continues to get attention. Legislators and tax agencies in border states have introduced changes and credits in light of remote work patterns. For context on recent proposals and credits affecting commuters around New York City, you can review CT legislature and remote worker tax developments.
Withholding and thresholds
Employees are often surprised when their W 2 shows withholding for more than one state, or when no state withholding was taken for a state where they later learn they must file a return. State employer withholding rules do not always line up with individual filing thresholds. Some states require employers to start withholding as soon as any work is done in the state. Some states use day count or income thresholds that delay withholding. Others have reciprocity that allows the employer to withhold only the home state tax once an employee signs the proper certificate.
Employers usually rely on state payroll guides and registration rules, along with employee withholding certificates. For a clear federal summary of payroll withholding responsibilities see IRS Publication 15 employer withholding. For a national overview of how nonresident withholding and nexus thresholds differ by state, see Tax Foundation on state income taxes and nonresidents.
Employees can help prevent surprises by communicating their work locations to payroll and HR, keeping a simple calendar of days worked in each state, and submitting any required reciprocity certificate. If you regularly perform services in another state and there is no reciprocity, your employer may need to register and withhold there. In convenience rule states, an employer may withhold for the employer state even when you work elsewhere unless you provide evidence for an exception.
New York offers a practical look at how employers and workers can document nonresident withholding positions using allocation forms and certifications. Review the employer guide and related forms at NY IT 2104.1 and withholding rules at NY Dept. of Taxation. These materials help illustrate how work location records and employer requirements support wage allocation for tax.
Adjusting withholding and estimates
If your current withholding does not match where you expect to file and pay, adjust it now rather than waiting for filing season. Remote workers can owe tax to more than one state, or owe tax to a state even when their employer does not withhold there. You can handle the shortfall with state estimated payments or by asking payroll to increase withholding for the state that will tax your wages.
At the federal level, the rules for estimated payments and withholding coordination are explained in IRS Publication 505 estimated tax and withholding. While Publication 505 is federal, the same planning logic applies to states. Look up your state’s estimated tax vouchers and due dates and mirror the approach. Employers follow IRS Publication 15 employer withholding for payroll mechanics, while you control your W 4 and any state equivalent and can request extra state withholding if needed.
A practical approach for remote workers in multi state situations looks like this. Project your total wages and identify which states will tax them. Confirm whether any reciprocity applies. Check the convenience rule risk if your employer is in a state that uses it. Review your year to date paystubs to see current withholding by state. If you are under withheld for a state that will tax your income, either ask your employer to add or redirect state withholding or make quarterly estimated payments to that state. Keep copies of any nonresident returns filed, as you will likely claim a resident credit for those taxes.
Do not forget local tax. Some cities impose income tax. If you work in such a location, check whether the city allows a credit or whether you must make separate estimated payments. Your resident state credit may not cover local tax unless the law specifically allows it.
Real world scenarios
Remote workers multi state taxes can feel abstract until you map a few situations. These examples are general education, not advice for your exact facts. State rules change, so always review current guidance or speak with a professional.
Texas resident working remotely for a New York employer. You live and work full time from Texas, which does not tax personal income. Your employer is based in New York. New York uses a convenience of the employer rule. Unless your employer requires you to work from Texas for a business reason, New York may tax your wages as if worked in New York. Your W 2 may show New York withholding all year. You file a New York nonresident return reporting wages sourced to New York. You owe no Texas income tax and there is no resident credit because Texas does not have one. Your cash planning move is to confirm New York withholding is correct and to consider whether you can document an employer necessity for out of state work for a future year. Review the New York approach and related employer forms at NY IT 2104.1 and withholding rules at NY Dept. of Taxation along with background at NYSSCPA on the convenience rule.
New Jersey resident working partly in New York and partly at home in New Jersey. As a New Jersey resident, you report all income to New Jersey. Because your employer is in New York and New York uses a convenience rule, it may treat your New Jersey work days as New York days unless the employer requires the New Jersey location for business reasons. You file a New York nonresident return and a New Jersey resident return. New Jersey allows a credit for tax paid to New York on the same wages. The credit may not fully eliminate the New Jersey tax if rate differences apply, but New Jersey has added relief measures for residents who pay tax to convenience rule states. Check current state instructions when you file.
Maryland resident working in the District of Columbia. DC and Maryland have reciprocity. File the DC nonresident certificate with your employer so it withholds Maryland tax only. You file a Maryland resident return and usually do not file in DC for wages covered by reciprocity. If your employer did not have the certificate and withheld DC tax, you may file a DC nonresident return to request a refund and then pay Maryland with your resident return. Review state reciprocity details at Tax Foundation’s reciprocity page and check your state DOR site for the exact certificate name.
Virginia resident who travels to North Carolina for projects. You are a Virginia resident who spends some weeks each quarter at client sites in North Carolina. Your employer withholds North Carolina tax for those work days. At year end you file a North Carolina nonresident return reporting wages earned in that state and a Virginia resident return. On the Virginia return, you claim a credit for taxes paid to North Carolina for the wages taxed there. You keep copies of your W 2 showing NC withholding, the NC nonresident return, and your North Carolina proof of payment. Virginia’s credit documentation process is described at Virginia: credit for taxes paid to another state (VA DOR).
Pennsylvania resident working in New Jersey. Pennsylvania and New Jersey have reciprocity. You file the appropriate New Jersey certificate with your employer so that only Pennsylvania withholding is taken from wages. At filing time, you file a Pennsylvania resident return and generally no New Jersey nonresident return for wages covered by reciprocity. If you did not file the certificate and New Jersey withholding occurred, a New Jersey nonresident return may be needed to claim a refund of that withholding.
Move midyear from California to Arizona while working for a Nevada employer. You lived in California from January through May, then moved to Arizona in June. You work remotely for a Nevada employer. Nevada has no state income tax. You will file a California part year resident return, reporting all income while a California resident plus any California sourced income after you moved, and an Arizona part year resident return for the Arizona period. There is no other state wage tax credit in this case because the work state, Nevada, did not tax your wages. If in any month you traveled to California for business, wages for those days could be California sourced and would be reported on a nonresident or part year basis. Document those days with a simple work calendar and keep travel receipts in case of questions.
Independent contractor with clients in more than one state. If you work as an independent contractor, your income is typically sourced to where you perform the work under each state’s rules. Some states look at the location of the benefit of the service, and some look at where the income is received. You could have filing obligations in multiple states even without wage withholding. Contractor situations vary widely and deserve a project plan for estimated payments and state registrations if required.
Top tips to avoid surprises
Good records and proactive payroll steps can prevent last minute stress. These practical tips apply to employees and freelancers who work across state lines.
Confirm your resident state and whether you were part year anywhere during the year. Residency drives the return you always file.
Check if your states have reciprocity. If they do, submit the work state nonresident or reciprocity certificate to your employer so only resident state withholding applies. See Tax Foundation’s reciprocity table.
Track work days by state. A basic calendar or exported timesheet is enough and can support wage allocation and credits later.
Review your paystub state codes quarterly. If withholding does not match your expected tax obligations, ask payroll to update your state withholding elections.
If any state will tax you and withholding falls short, make quarterly estimated payments to that state. Federal guidance on estimates is in IRS Publication 505 estimated tax and withholding.
Save copies of nonresident returns and proof of payment for credit claims on your resident return. See the documentation example at Virginia: credit for taxes paid to another state.
If your employer is in a convenience rule state, collect employer memos or policies that show a business requirement for your out of state work if one applies. See NY Dept. of Taxation employer guidance.
Do not ignore local taxes. City or county tax may require separate payments or returns.
If you change work locations during the year, update payroll immediately and revisit your estimated payments.
When in doubt, ask a CPA who handles multi state payroll and filings. A quick review midyear can save money and time at filing season.
Frequently asked questions
Will I be taxed by both states if I live in one state and work remotely for a company in another?
Possibly. You generally file a resident return where you live and a nonresident return where the income is sourced. Most resident states provide a credit for taxes paid to another state on the same income. Reciprocity and convenience rules can change the result. For a state example of the resident credit and required documentation, see Virginia’s credit guidance.
What is a reciprocity agreement and how do I claim it?
Reciprocity allows wage income to be taxed only by your resident state when you live in one state and work in the partner state. To use it, submit the work state’s nonresident or reciprocity certificate to your employer. See the list and links at state reciprocity agreements and nonresident withholding at Tax Foundation.
What is the convenience of the employer rule and who uses it?
It is a sourcing rule that treats out of state work as work performed in the employer’s state unless the out of state work is required by the employer for business reasons. New York applies this rule. Other states apply similar approaches in some circumstances. See background at NYSSCPA and employer materials at NY Dept. of Taxation.
How do I avoid double taxation at year end?
Check withholding during the year, make state estimated payments if needed, gather proof of other state tax paid, and claim the resident credit on your return following state instructions. See the documentation example at Virginia: credit for taxes paid to another state.
What documents should remote workers keep?
W 2s with state withholding amounts, copies of any nonresident returns, reciprocity certificates you filed, work location calendars, employer memos about required work location, and for New York situations any allocation forms such as IT 2104.1. See NY employer withholding guidance.
Should my employer withhold in my home state or the employer state?
It depends on reciprocity, employer registration, day or income thresholds, and any convenience rule. Employers must follow state payroll rules and will rely on your withholding certificates. See national context at Tax Foundation on state income taxes and nonresidents.
Do I make federal or state estimated payments if payroll cannot change in time?
You can do both. For federal, follow IRS Publication 505 estimated tax and withholding. For states, use each state’s estimated payment vouchers and due dates. Aim to cover at least the expected liability in states that will tax your income.
Do states with no income tax affect credits?
If you live in a state with no income tax such as Texas, there is no resident credit to claim. If another state taxes your wages, you pay that other state and you do not file a resident return for wages in Texas. If you live in a taxing state and work in a no tax state, you still owe tax to your resident state.
What if I moved midyear?
You will likely file part year returns for the states you lived in. Credits for taxes paid to other states can still apply on a part year basis, but the calculation and documentation vary. Keep careful records of move dates and work days in each state.
Are independent contractors treated the same as employees?
No. Contractors often source income to where services are performed or where the customer benefit is received, depending on the state. There is usually no wage withholding, so contractors should plan for state estimated payments and possibly business registrations if they have nexus in a state.
Talk with Alviso, CPA
Multi state work can raise questions about residency, source of income, reciprocity, and credits. A short review before year end can help you set withholding correctly, avoid penalties, and assemble the documents you will need to claim a credit for taxes paid to other states. Alviso, CPA is based in Texas and helps remote employees, executives, and freelancers across the country plan for these rules. Reach out if you would like a quick payroll and withholding review, a resident credit walkthrough, or help with nonresident filings.
As you plan for 2025, use the resources linked in this guide. Check reciprocity using Tax Foundation. Review withholding mechanics in IRS Publication 15 employer withholding and adjust your estimates with IRS Publication 505. For resident credits, look at your state’s department of revenue pages, such as Virginia’s credit page. With the right steps, remote workers multi state taxes do not need to produce a surprise bill at filing time.
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