Working from home because of COVID-19? You might have screwed up your tax situation for 2021
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  • The latest coronavirus update we have continues to paint a fairly bleak portrait of where the US is at with its COVID-19 response, as the pandemic continues to get worse in the colder months of the year.

  • Some professionals are using the coronavirus pandemic as an opportunity to try remote working.
  • However, a survey from the American Institute of CPAs found that some 70% of US adults didn’t realize this situation might trigger a state tax obligation for them.

It’s become a tiresome phrase by now, but one of the “new normals” that the coronavirus pandemic has ensured will be with us for some time to come is the reality of working outside of a crowded office — which can take various forms, including working at home as well as remote work, where employees don’t even necessarily need to live in the same city as their employer anymore.

Lots of companies are already telling their workers that they’ll be deep into 2021 before they even need to think about returning to a physical office because of the pandemic. Tech giants like Facebook, Google parent company Alphabet, and Amazon have told their employees they won’t be back until July or August, while other major companies are already laying the groundwork for rotations, whereby some employees would only be in the office on certain days. This all comes as the latest coronavirus update continues to paint a pretty bleak picture in the US, with the most recent Johns Hopkins University data as of the time of this writing showing that more than 12.5 million coronavirus cases have been identified in the US to-date, along with more than 259,000 deaths.


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Something else the coronavirus pandemic has done is produce all kinds of unintended side effects from all the dramatic ways we’ve changed our lives — like how many people have decided to take this opportunity to pursue the freedom of remote working. If you don’t have to be at the office for several months, the thinking goes, well, heck — why don’t you just get your work done from the beach, right? While social distancing, of course.

The problem, according to the American Institute of CPAs, is that many people aren’t aware that you can face tax consequences if you don’t update your state tax withholding when your work situation changes. In situations, for example, that can include telecommuting from a different state.

The organization polled a little more than 2,000 US adults in October and found that about 70% didn’t realize that remote working from a different state potentially affects the state taxes they owe. “If you’re working in multiple states during the year, it causes complexity,” CPA Eileen Sherr, CPA, director for tax policy and advocacy at the AICPA, told CNBC. “When these people file, they will owe money if they haven’t had any tax withholding in that state. So they need to change their withholding, so they don’t have a big payment in April.”

If you work in one state but live somewhere else, you might actually owe taxes in both states. Moreover, this whole thing can be compounded further by the fact that cities and counties can also tax your income, too.

The way to deal with this is by proactively talking to a tax professional well ahead of time. That way, you can ensure you don’t wind up with a large, surprise bill from the taxman the following year.

Andy is a reporter in Memphis who also contributes to outlets like Fast Company and The Guardian. When he’s not writing about technology, he can be found hunched protectively over his burgeoning collection of vinyl, as well as nursing his Whovianism and bingeing on a variety of TV shows you probably don’t like.

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