Let’s be honest—the shift to remote and hybrid work felt like a liberation at first. No commute, more flexibility, maybe even a move to that dream town. But then the tax forms arrive. And suddenly, you’re facing a tangle of rules that feels more complicated than untangling last year’s Christmas lights.
Here’s the deal: when your work location becomes fluid, your tax obligations don’t necessarily simplify. In fact, they can multiply. You might owe taxes in more than one state, or even city. Navigating this new landscape is crucial to avoid surprises, penalties, and a major headache come filing season.
The Core Principle: It’s All About Nexus
Forget what you knew about filing taxes where your office was. The key concept now is nexus. Think of nexus as a threshold of economic connection—a “tax presence”—that triggers a filing requirement in a state. For employees, this is primarily driven by physical presence. Work from your kitchen table in Colorado for a company based in New York? You’ve likely established nexus in both states.
That physical presence rule isn’t just for full-time relocation. Pre-pandemic, many states had a “convenience of the employer” rule. And, well, some still fiercely hold onto it. We’ll get to that.
The Big Challenges for Remote and Hybrid Employees
1. The Dreaded Double Taxation (And Credit Relief)
This is the nightmare scenario: two states taxing the same income. Imagine you live in State A but work remotely for a company in State B. Both states might claim you owe them income tax. Thankfully, most states offer a resident tax credit to avoid this. You’d pay tax to both, but your home state gives you a credit for taxes paid to the work state. It reduces your bill, but the paperwork? It doubles.
2. The “Convenience Rule” Heavy-Hitters
Now for the real curveball. States like New York, Delaware, Nebraska, and Pennsylvania have what’s called a “convenience of the employer” rule. If your employer’s office is in one of these states, but you choose to work remotely for your own convenience (not because your employer requires it), they can still tax all your income as if you never left.
You could be living in, say, Florida (a no-income-tax state), working for a NYC-based company, and still owe New York state income tax. It’s contentious. It feels unfair to many. But it’s a current reality for employees of companies in those states.
3. Local Taxes: The Plot Thickens
Just when you thought you had states figured out, cities and municipalities chime in. Places like New York City, Philadelphia, and San Francisco have their own local income taxes. If you establish residency or work within their borders—even partially in a hybrid setup—you may owe. A hybrid worker splitting time between a home in New Jersey and an office in NYC has a particularly complex calculation to make.
A Practical Guide to Staying Compliant
Okay, so it’s messy. What can you actually do? Start with this action plan.
Step 1: Map Your Physical Presence
Grab a calendar. Honestly, do it. Mark every day you worked in every location—your home state, a coworking space, your company’s office, even that Airbnb where you logged in for a week. Many states have a de minimis number of days (often 30-45) before they care, but some, like New York, can assert a claim much faster. Don’t guess. Track.
Step 2: Understand Your Employer’s Role
Your company’s payroll department is your first line of defense—or confusion. They withhold taxes based on the work location they have on file for you. If you move or have a multi-state work pattern, you must tell them immediately. Their ability to withhold correctly for multiple states is key to avoiding a giant lump-sum payment in April.
Step 3: Know the Reciprocal Agreements
A bit of good news! Some neighboring states have reciprocal agreements. These allow you to work in one state while living in another and only pay income taxes to your state of residence. For example, agreements exist between Virginia and Washington D.C., Pennsylvania and New Jersey, and Illinois and Iowa. Check if your states play nice together.
| Common Pain Point | Potential Solution / Consideration |
| Working from a no-tax state for a company in a high-tax state | Check for “convenience rule” application. Update payroll withholding immediately upon move. |
| Hybrid schedule splitting time between two states | Maintain a precise day log. Employer may need to do composite withholding. |
| Temporary work stints in other states | Know the de minimis days for each state you enter. 30 days is a common threshold, but not universal. |
| Local city or school district taxes | Research local earned income taxes (EIT) in both your home and work locations. |
The Future is… Still Fuzzy
Legislation is trying to catch up to our new way of working, but it’s slow. Some states are considering laws that would tax remote workers based on their actual location, full stop. Others are digging in on the convenience rule. The trend, honestly, is inconsistency. This patchwork system is the environment we have to navigate for the foreseeable future.
So, what’s the final thought? Proactivity is your only real shield. Treat your multi-state work life not as a simple change of scenery, but as a fundamental shift in your financial footprint. The burden of proof is on you to know where you worked and for how long. A conversation with a tax professional who specializes in multi-state issues isn’t an extravagance anymore—it might just be the cost of doing business in this new, borderless world of work.
