Many Americans Unaware of Tax Repercussions of Working Remotely

By Alex Padalka November 13, 2020

A large number of Americans have worked remotely as a result of the Covid-19 pandemic — but many aren’t aware of what that could mean for their taxes, according to a recent survey.

A survey of 2,053 U.S. adults conducted by the American Institute of CPAs showed that 58% are currently employed. And among those with jobs, 42% have worked remotely during the pandemic and 25% are still doing so, according to the survey conducted form October 6 to 8.

Around 55% of those who went on a remote work arrangement during the crisis aren’t aware that failing to change their state tax withholding to account for the remote work can have tax repercussions, according to the survey.

Moreover, 47% of respondents who have worked remotely during Covid-19 aren’t aware that each state has its own laws on remote work, 71% didn’t know that working remotely in another state can affect the amount of state taxes they owe and 54% aren’t aware that the duration of their work outside the state where their physical workplace is located could also affect their state taxes, AICPA found.

Meanwhile, 42% of Americans aren’t sure whether their state has state income tax reciprocity with other states, according to the survey.

At the same time, 75% of remote workers in the survey who have worked outside the state of their physical workplace have worked out-of-state for 60 days or less, and 51% have worked out-of-state for less than 30 days, AICPA found. But those who have worked out of state did so from three states on average, according to the survey.

AICPA notes some “optimistic” data from the survey as well: 67% of those working out-of-state report notifying their employer of the state they’re working in; 51% tracked how long they worked in each state; and 41% changed their state income tax withholding.

“Some remote workers are taking the right steps — notifying employers, tracking days and changing state tax withholding — but there are still too many that are not taking action, likely because they not aware they should be,” Eileen Sherr, AICPA director for tax policy & advocacy, says in a statement. “Failure to take these steps could mean an unpleasant surprise at tax time in 2021. Remote workers should take steps now to track their remote work and try to educate and prepare themselves for what the upcoming tax season might mean for them.”

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