I’ve been a remote worker for 16 years, the first remote worker the company ever had. For a few years my paycheck reflected the company’s state in taxes, the state I moved to doesn’t have state tax. I was contacted by someone in accounting who said I should question this so I went to a local tax accountant in my residential state who confirmed that I shouldn’t be paying some of those taxes. I then had to file a form with the the state where my company resides proving where I lived. That state agreed that I shouldn’t have to pay those taxes and I could reclaim 3 years in back taxes. I believe these laws go state by state.
This type of issue results from one of several things or a combination.
-The company’s payroll person was not well versed in multi-state payroll.
-A supervisor who didn’t inform payroll of the change of your work location. Yes, payroll however should have been triggered by your change of home address to question where you were working.
Sounds like the accounting department caught this in some type of audit and good for them!
At my last job, a company with over 3,500 employees in nearly all 50 states and many working remotely, we ran weekly change of home address reports to identify this type of issue.
And I was responsible for setting up new hires and when I saw an employee assigned to a work office in another state from the employees home address (and not close by enough to commute back and forth), I would question both the employee, their supervisor and HR as to their actual “physical” work location and would often have to get HR to change the work office to their lived in state office if there was one, or flag them as “Working from Home” so taxes would be withheld based on their home address in the PR/HRIS system and send the new hire the correct state withholding form to complete and send back.
It used to drive me crazy when the supervisor would come back and say, “They are going to be working from home for the first couple of months then moving to x state.” My answer was always, “While they are working from home, they are subject to that state’s withholding. After they move, they will need to update their address in the system or with HR and we will update the state withholding accordingly.”
Sometimes the employee didn’t like this answer as it meant they would have to file state tax returns in two states for that year, but it is what it is. In the rare cases where the employee was moving within a week or two after hire, I could set them up from the start with their new address if it was known so to avoid this.