Remote workers should be aware of their 2021 tax obligations.

• Each state has its own guidelines for when you must disclose income earned.
• Residents of most states receive a tax credit for payments made to a different state.
• Experts suggest that it may be beneficial to seek advice from a tax professional due to the complexity of the topic.

Remote work may have some advantages, but a simplified tax situation is not one of them.

It is crucial to comprehend your state tax obligations during the current tax-filing season if you worked remotely in 2021. Your state of residence, the duration of your employment, and the location of your employer may necessitate filing more than one state tax return.

Jared Walczak, vice president of state projects for the Tax Foundation, stated that if you spent a considerable amount of time working in another state in the past year, you are likely to have an income tax obligation there.

401(k) plans have undergone changes this year. It is crucial to update your will or estate plan. There are three reasons why you should keep your will or estate plan up to date. Additionally, there are new developments regarding required minimum distributions.

Different states have varying expectations regarding when individuals must disclose income they earned while residing there.

Some states allow nonresidents to work within their borders for at least 30 days without a withholding requirement, while others require payment from day one. Additionally, some states have a wage-based threshold for taxation, while nine states have no income tax at all.

Whether another state has the authority to tax your income, regardless of where it was earned, is the bigger question, as your state of residence generally has the right to do so.

If the tax rate in the second state is higher than where you reside, the tax credit offered by most states may not completely offset the amount paid to the nonresident jurisdiction where you worked and owe taxes.

April Walker, lead manager for tax practice and ethics with the American Institute of CPAs, stated that while tax credits can be helpful, they do not always provide a dollar-for-dollar offset.

Reciprocal agreements exist between 16 states, meaning if your home state has a pact with the state where you work, you won't have to pay taxes in both jurisdictions.

If you reside in Maryland but work in the District of Columbia, you only need to concern yourself with taxes being withheld for Maryland and filing a tax return there.

In some states, including Connecticut, Delaware, Nebraska, New York, and Pennsylvania, remote workers are subject to a "convenience of employer" test. This means that if your company is located in one of these states, you will generally pay taxes there, regardless of whether you physically set foot in the state or not, as long as your remote location is not required by your employer.

If you are an independent contractor for your company, you do not receive a W-2, but rather a Form 1099-NEC. As a result, you are considered self-employed and taxed accordingly. This means that you are responsible for determining which states you owe taxes to, based on factors such as your residence, the location of your earnings, and the amount earned.

If you believe you need to file a return in multiple states, it's advisable to consult with a tax advisor, regardless of your employment status.

The taxation of remote workers may be altered in the future due to the pandemic-induced increase in the country's mobile workforce (45% of full-time employees were working remotely in September, according to a Gallup poll).

The Remote and Mobile Worker Relief Act of 2021, a bipartisan bill in the Senate, would prevent states from imposing taxes or withholding on nonresident employees who spend less than 30 days in the state. A corresponding measure is currently being considered in the House.

Congress has been stalled on passing Senate and House bills that would restrict states' power to apply the "convenience of employer" rule to nonresidents since early 2021.

Although some states may have relaxed their rules earlier in the pandemic, it's uncertain if this will continue, and states may increase their enforcement efforts.

You can't assume the state won't pursue you as a taxpayer, she stated.