Working from home now? Your 2020 state tax situation could suck

Enlarge / The arm of the law can be long indeed. (credit: Aurich Lawson / Getty Images)

Imagine for a moment that you work remotely-as so many now do in the COVID era-from a comfortable spare bedroom in your New Jersey home. Your employer is nominally based in New York City, but thanks to the pandemic, you didn't even cross the Hudson River last year. So how is it that New York claims you owe it a pile of cash for state taxes?

Maybe this doesn't sound terrible; after all, New York's tax rates don't differ so dramatically from New Jersey's. But imagine instead that you took the opportunity provided by telecommuting to move to a "no income tax" state like Texas. Come tax time, you are planning on a big fat nothingburger of a state tax bill. And yet, New York could still claim state tax on your earnings. Now we're talking a serious-and perhaps completely unplanned-financial hit.

Welcome, telecommuters, to the nightmare that can result when you and the state disagree about "where" you work.

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