With coronavirus lockdowns and office closures on the brink of stretching into year two, many Americans find themselves working from a different state than where they were when the pandemic began.
Whether you moved back in with your parents to save money or decamped to Miami to escape the cold, you could find yourself tangled in a web of complicated tax obligations. Before you file, make sure you know what you owe in taxes — and where you owe them.
Here's what you should brush up on if you lived in two or more states in 2020.
First, you need to determine if you actually changed your residency
There's a big difference between renting a summer house out-of-state to escape the city for a few months and actually making an official move. For many people who fled urban centers during the height of the pandemic, it's likely they didn't do the paperwork necessary to officially change their primary residence.
"It's not merely a [number of days] test," Ryan Losi, certified public accountant with Piascik, tells CNBC Make It. "There are other factors that come into play to determine your residency, including your voter registration card and driver's license registration."
For many people who left a place like New York City, for example, last winter or spring without knowing if or when they were returning, it's likely that their taxes will remain the same, especially if they kept their New York-based jobs and worked remotely.
"If an employee was formerly in New York and then continued their New York-based employment, then New York will probably lay claim to those taxes," Losi explains.
You can read up on the differences between residents, nonresidents and part-year residents here.
Next, determine if your state tax authority granted any Covid-related relief in 2020
Some states are dogged in their pursuit of every last taxable dollar earned by their residents, Losi says. Others, however, issued forms of relief during the beginning of the pandemic for employees who could no longer go to the office or were otherwise forced to relocate.
"Many tax authorities issued relief that basically said, 'we're not going to count the days that you're physically in another location thanks to Covid,'" Losi said. "That's the first thing you need to look at."
The best way to do this is to visit your city or state's tax department. In most states, this is called the "Department of Revenue," but some places may dub it the "Department of Taxation." New York City residents will be looking for the "Department of Finance" website. If you don't know what your state's tax agency is called, you can search by state here.
Look for the section on Covid-19 information; most of the sites have a prominent banner up top. Be on the lookout for references to "non-residents telecommuting" or language relating to remote work.
It's important to know the rules of each state where you worked, because depending on where you went and where you came from, you could be required to pay taxes to two states on the same income.
Do your best to follow the rules, but seek help if you need it
Every state has its own policies surrounding taxes, and things can get complicated if there is a conflict with the policies from another state you worked from remotely. Follow the instructions that the states give you, and don't hesitate to consult with a CPA if you're unsure about your specific situation — especially if you're a high-earner.
"The state tax authorities have limited resources," Losi says. "They're not going to go chasing pennies. They're going to go after big-dollar residency issues. If your numbers are big, you probably want to have a tax CPA advise you."
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