Although the election may be coming to a end, thinking about your employment and income taxes is just beginning! This is especially true since tax season is less than a couple of months away. Below, you will learn about possible surprise taxes when it comes time for you to file in 2021.
You would think that you would only be obligated to pay the income tax in only the state that you reside in, right? Well, not necessarily. According to CNBC, workers around the U.S. might be hit with a surprise income tax in the new year. The American Institute of Certified Public Accountants (AICPA) which is "the world’s largest member association representing the accounting profession" and The Harris Poll show that many taxpayers were unaware of the state tax liabilities that came with being a remote worker. For example, if you live in Washington State but you are working remotely for a company based in Kentucky, you may be stuck paying for income taxes in both states.
There are certain pacts that some states have between each other such as Pennsylvania and New Jersey, and similar agreements that exist between Maryland, Pennsylvania, Virginia, West Virginia and Washington, D.C.
There may be other states with agreements like this so if you are a remote worker based in one state but working for a company in another, there might be reciprocity agreements that you may be entitled to take advantage of!
Mercado, D. (Ed.). (2020, November 07). If you worked remotely due to Covid-19, a state tax surprise could be coming. Retrieved November 08, 2020, from https://www.cnbc.com/2020/11/06/if-you-worked-remotely-due-to-covid-19-a-state-tax-surprise-could-be-coming.html
AICPA/Harris Poll Reveals Many Taxpayers Unaware of State Tax Liabilities Related to Working Remotely. (2020, November 05). Retrieved November 08, 2020, from https://www.aicpa.org/press/pressreleases/2020/aicpa-harris-poll-reveals-taxpayers-unaware-of-state-tax-liabilities-related-to-working-remotely.html