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In this case, you and your cross-border worker could be subject to tax liabilities in both states. Reciprocal agreements\u2014or a compromise between states that allows nonresident workers to request tax exemption from the other state\u2014exist in some places to prevent double taxation, but only some states have one. In these situations, the employee’s resident state may issue a tax credit for any income paid to your organization’s state. When you have remote workers in different states, it can be difficult to understand your state tax requirements.<\/p>\n<\/p>\n
In general, they need to pay income taxes based on where they consider themselves as a tax resident. This is usually where they spend the most days in a year or where they maintain residential ties like a home or apartment. Digital nomads may end up paying double taxation when they pay taxes in multiple countries. The convenience rule can obligate employees to pay income tax to states they might now never step foot in, since it taxes income based on the location of the employer\u2019s office. Typically, when this happens, the state where the person lives would award a tax credit to offset taxes in the state where that person works. A number of states have allowed people currently telecommuting to be taxed in the state where their job is located.<\/p>\n<\/p>\n