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We relocated from PA to NC, but I will work 100% remotely for a company branch located in PA.

My tax withholding were adjusted so that $0 goes to PA and appropriate amount goes to NC.

I found conflicting information on the internet. Some articles say that you pay ALL you taxes in state of residence (NC). Some say that you still need to pay tax to PA and then claim a credit on NC to avoid to be double taxed.

Link1

However, at present five states do not follow that rule. Those states are New York, Pennsylvania, Delaware, New Jersey and Nebraska. In those states all wages earned from an employer in any of those states are allocated to those states unless by necessity the nonresident’s work must be performed from his or her out-of-state location. Basically, these states will tax a nonresident telecommuter’s wages if the work is performed out-of-state for the convenience of the employee.

What material evidence is needed (if at all) to prove the "necessity" and "convenience"? How do they even verify something like that? All they get is W2 no? Or does the employer sends some additional paperwork to clarify that?

In case, I need to pay taxes in both states and claim a credit in NC. How does that needs to be reflected on the paycheck withholding? Should they still withhold 0$ to PA?

Please advice

  • There is also a Philly wage tax, which has recently changed. – StrongBad Sep 27 '17 at 1:18
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I've been in your shoes for quite some time, though with different state pairings.

You may owe taxes to the state where the company is located. And you may owe taxes to the state in which you live. I had this happen when I worked for a company in CT. I had to file CT & KY returns that year, claiming a tax credit in KY for my CT taxes paid, ultimately getting a refund from CT.

If your company is smart, you don't need to worry about it. THis is far far more common, in my experience: if they use a company like ADP or TriNet for handling their HR needs, the outsourcing company is registered in every state, so you pay state & local taxes where you live, and only file state returns for the state(s) you live in during the year.

  • How is employer location determined? – Acccumulation Nov 25 '17 at 19:48
  • @Acccumulation - it's wherever they incorporated, usually, unless they do something smart and outsource their HR – warren Nov 25 '17 at 22:10
  • So you're saying that if a corporation incorporates in KY and then opens a store in CT, then KY is going to claim that everyone who works in the CT location owes KY income tax? – Acccumulation Nov 25 '17 at 23:41
  • @Acccumulation - for physical locations, perhaps .. perhaps not. It depends on several factors. – warren Nov 26 '17 at 17:35

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