Tax Considerations for Remote Workers

Tax Considerations for Remote Workers

The Core Issue

When you work remotely in a different state than your employer, you may have tax obligations in both states.

Resident State Taxes

You generally owe income tax to the state where you live, on all your income (including remote work for out-of-state companies).

Source State Taxes

Some states claim the right to tax your income if the work "benefits" a company in that state, even if you never set foot there.

Convenience of Employer Rule (New York, Connecticut, Arkansas, etc.): If you work from home for your own convenience (not because the employer requires it), the full income may be taxed by the employer's state.

Reciprocity Agreements

Some neighboring states have reciprocity agreements: residents of one state pay income tax only to their home state.

• Illinois has reciprocity agreements with Iowa, Kentucky, Michigan, and Wisconsin.

What About Working Abroad?

• If you're a U.S. citizen or resident, you owe U.S. taxes on worldwide income
• Foreign Earned Income Exclusion may apply (up to $130,000 in 2025)

Practical Steps

1. Determine where you're domiciled
2. Check reciprocity agreements
3. Track days in each state
4. Consult a tax professional for multi-state situations

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Working remotely across state lines? Multi-state tax compliance is complex — we can sort it out.