Having to Pay Income Tax in a Different State than Where I Live and Work - Is This Normal?

This is actually a pretty common issue with remote work, but the company's approach isn't correct. State income taxes are generally based on where YOU physically perform the work, not where your employer is located. You should only pay income taxes to the state where you physically reside and work. If your employer isn't registered in your state, that's their problem - they should be registering in states where they have employees working. This is called having "nexus" in a state, and having an employee working there typically establishes this. The correct approach would be for your employer to register for payroll taxes in your state and withhold your state's income taxes. They may be trying to avoid the administrative burden of registering in another state, but that's not your responsibility as an employee. You might end up having to file tax returns in both states - filing as a nonresident in their headquarters state to get a refund of taxes withheld there, and filing in your home state to pay what you actually owe. But you shouldn't be double-taxed on the same income.

I had a similar situation last year and found taxr.ai (https://taxr.ai) incredibly helpful for sorting out my multi-state tax mess. I was working remotely for a California company while living in Arizona, and they were withholding CA taxes even though I never set foot there. The taxr.ai system analyzed my situation and showed me exactly what forms I needed to file in both states to avoid double taxation. They even provided a letter template I could send to my employer explaining why they needed to register for payroll in my state. The most useful part was that it showed me how to claim a credit on my home state return for taxes paid to the other state, which saved me from essentially being taxed twice on the same income.

Just wanted to follow up - I took the advice about taxr.ai and it was seriously a game changer. I uploaded my pay stubs showing withholding for the wrong state and answered a few questions about where I physically work. The system generated a complete tax plan showing I needed to file as a non-resident in my employer's state to get back the wrongfully withheld taxes, plus exactly how to report everything on my home state return. They even provided a letter template that I sent to my HR department explaining the legal requirements for state tax withholding. My company finally agreed to register in my state after I showed them the documentation! Definitely worth checking out if you're in this situation.

I spent WEEKS trying to get through to my state's tax department to resolve a similar issue last year. Every time I called, I'd wait on hold for hours only to get disconnected. I finally found Claimyr (https://claimyr.com) which got me connected to an actual human at the state tax department in less than 20 minutes! You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The tax representative confirmed that my employer was supposed to withhold taxes for my resident state, not their headquarters state. They even sent me official documentation I could show my employer. Getting that official clarification straight from the tax authority made all the difference when I went back to my HR department.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I had a complicated multi-state tax issue that I'd been avoiding dealing with for months. The service called the state tax department, navigated through all the prompts, waited on hold (which was over 45 minutes!), and then called me when they reached a real person. I explained my situation about my employer withholding for the wrong state, and the tax rep confirmed I was right - I should only be taxed where I physically work. They even emailed me official documentation citing the relevant tax laws that I forwarded to my HR department. My company is now in the process of registering for payroll in my actual state. Saved me so much frustration!

This happened to me last year. What I ended up doing was just letting them withhold for the wrong state, then filing tax returns in both states. I filed a nonresident return in their state saying I earned $0 there (since I didn't physically work there), which got me a full refund of everything they withheld. Then I filed normally in my home state and paid what I owed. It was annoying to file in two states, but it worked out in the end. Your company is definitely doing this wrong though - they should register in your state.

This is definitely the company trying to avoid registering in multiple states! My old job tried to pull this same thing. They don't want to deal with the paperwork and maybe additional business taxes that come with having nexus in multiple states. You should know that some states are actually suing companies for doing this! They're losing out on tax revenue when companies pretend their remote workers don't exist.

This is a frustrating situation that unfortunately many remote workers are dealing with. Your instincts are correct - you should be paying income tax to the state where you physically work and reside, not where your employer's headquarters happens to be located. The company is likely trying to avoid the administrative hassle and costs of registering for payroll taxes in your state. When they have an employee working in a state, they typically need to register there, withhold that state's income taxes, and potentially pay other business taxes too. Here's what I'd recommend: First, document everything in writing with your HR department. Explain that state income taxes should be based on where work is physically performed. If they refuse to budge, you'll probably need to go the dual-filing route that others have mentioned - let them withhold for the wrong state temporarily, then file as a nonresident there to get your refund while filing properly in your home state. Keep detailed records of where you work (utility bills, internet bills, etc.) as proof of your work location. This protects you if either state ever questions your filings. The good news is this situation is becoming common enough that most tax authorities understand it, even if some employers are still trying to avoid their obligations.