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Suppose your temporarily remote employee typically works in the same state as your office location but currently works remotely in another state. For a state to consider someone a temporary worker, you must expect the temporary remote worker to return to their permanent location. Otherwise, state governments consider them permanent residents of the other state. States Applying the Rule A permanent remote worker will file their personal income taxes in their state of residence, whether they are a W-2 employee or a 1099-NEC independent contractor. Some states have reciprocal agreements that allow residents of one state to work in another without having to file a non-resident tax return. Employers have a legal responsibility to withhold taxes for all W-2 employees, including their remote workers. U.S. companies with remote workers in foreign countries, for example, must withhold taxes on their employees’ behalf based on their countries of residence. When a remote employee works from home in a different state from where the employing  business is based, withholding of  income taxes should be based on where the employee lives and works. State income tax reporting, in this case, is based on the remote employee’s state of residence, not the residency of the employer. At the federal level, employers must withhold federal income tax, Social Security taxes, Federal Unemployment Tax (FUTA), and Medicare taxes for all W-2 employees, including remote workers. As we’ve noted, employment laws at the state and local level change as you cross jurisdictional lines. For both remote employees and employers, staying informed about tax regulations and tracking work locations can help ensure compliance and avoid costly penalties. U.S. citizens, regardless of where they live or work, are generally required to pay U.S. federal income taxes on their worldwide income, including earnings from remote work conducted outside the United States. In a nutshell, when remote work crosses state lines, it can be hazardous to employers – in ways that aren’t necessarily apparent. You obviously jump at the opportunity without considering the ripple effect and its effect on your finances. For example, adding a new remote employee could require the company to file a corporate tax return in a new state or region, or register there to withhold payroll taxes. Also, state corporate tax apportionment calculations are often based on a company’s payroll in the state, so remote workers can change the amount of corporate taxes due. Consider partnering with a payroll and HR provider who has tax professionals on staff. You are legally required to withhold taxes for all W-2 employees, regardless of their location. However, the “work from anywhere” concept has been taken literally by a growing number of workers, who may now be working from a variety of locations, such as vacation homes, or with relatives in other states. If you are a part-year Missouri resident filing as a nonresident, you must include the other state’s income on your Form MO-1040. To determine the income tax you must pay to Missouri, complete Form MO-NRI(Missouri Income Percentage) and include a copy of your federal return. If a non-resident employee performs all of his or her services outside of Missouri, the wages paid to that employee are not subject to Missouri taxes. If a nonresident employee performs all of his or her services outside of Missouri, the wages paid to that employee are not subject to Missouri withholding. Any time an employee is performing services for an employer in exchange for wages in Missouri, those wages are subject to Missouri withholding. Providing access to tax resources or consulting support can increase compliance and reduce potential issues during tax season. For U.S. citizens working abroad, dealing with international tax laws, including the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC), can be challenging. Consulting a tax professional offers personalized guidance to help you navigate these rules, avoid common pitfalls, and maximize available exclusions and credits. A tax professional can also provide tailored advice based on your unique situation, helping you make informed decisions to minimize your U.S. tax liability. Remote work arrangements can be complicated for employees filing tax returns in multiple states. You are legally required to withhold taxes for all W-2 employees, regardless of their location. In these scenarios, sending online W-2s is an easier and faster option than mailing a paper copy. Because each state has its own laws and regulations, you must stay current on remote work implications for state and federal income taxes, unemployment insurance, and Medicare withholdings. Want to onboard an international employee today? Get started. State Labor/Workforce departments or tax agencies may not automatically know that an employee is working in their state. What tends to happen is that an employee may file a complaint or a claim for benefits, such as unemployment insurance or state disability benefits. Typically, the individual in a new state may learn about new benefits to which they are now entitled – such as paid family leave. In essence, an employer would not report wages and taxes to more than one state in any quarter, other than employees relocating permanently in mid-quarter. The best practices below can help both remote workers and organizations handle common payroll, withholding, and compliance challenges. Like the federal government, many US states levy an income tax to fund important social programs and projects. For employees living and working in the same state, calculating correct withholdings involves a single set of rules and regulations. However, once remote workers enter the mix, payroll processes and compliance workflows need to account for multiple requirements. Addressing the people and tax implications of hybrid and remote work If an employer has mistakenly overpaid on a return and the credit is not shown on the Online Credit Inquiry System, an Employer’s Withholding Tax Return Correction (Form MO-941) must be filed first. For employers, the rise of remote work brings unique responsibilities in managing remote worker tax compliance. You may be entitled to claim a credit against your Missouri tax liability for the income taxes paid to