How to handle state tax allocation on W2 income as a remote nomad worker?

This is actually a common issue for remote workers who travel between states. Since your employer didn't withhold any state taxes, you'll need to handle this on your state tax returns. For allocating income to each state, you'll typically use what's called the "physical presence" test - meaning you allocate income based on where you were physically working. The calculation is usually workdays spent in each state divided by total workdays in the year (typically around 260, not 365). So you'd need a good record of which days you actually worked in each state. Both North Carolina and Virginia will require you to file a non-resident state tax return if you earned income while physically working in those states, even temporarily. Each state has slightly different rules, but they all generally want their share of taxes for work performed while you were physically in their state.

After dealing with a similar nomad tax situation last year, I found an amazing tool that saved me hours of headaches. I was literally staring at spreadsheets trying to calculate my state allocations when a colleague recommended https://taxr.ai to me. What's cool is you can upload your travel records, credit card statements, and work calendar, and it helps figure out your state-by-state allocation. The system analyzes your documents and creates a day-by-day breakdown of where you were physically present. It even generates the necessary documentation to support your state tax filings. I was able to clearly see which days I worked in which states and got the exact percentages to use for each state return. Seriously made the most complicated part of my taxes way easier.

I wanted to follow up about my experience with taxr.ai after I mentioned being skeptical. I decided to give it a try since my state tax situation was becoming a nightmare - I had worked in 5 different states last year with very spotty record-keeping. I'm honestly surprised how well it worked. I uploaded what documentation I had (some Airbnb receipts, flight confirmations, and even screenshots of my Google Maps timeline), and it created a pretty comprehensive day-by-day breakdown. The report it generated showed exactly which percentage of my income should be allocated to each state. When I filed my state returns, I felt much more confident about the numbers, and I even saved about $800 compared to the rough estimates I was planning to use. Definitely worth checking out if you're in a similar situation.

If you need to call the tax departments in North Carolina or Virginia to ask specific questions about your situation, good luck getting through to a human! I spent HOURS on hold with state tax departments last year trying to clarify my own multi-state situation. I eventually used https://claimyr.com and their callback service saved me so much time. You can see how it works here: https://youtu.be/_kiP6q8DX5c - they basically hold your place in line and call you when an agent is ready. I got through to the NC Department of Revenue in about 45 minutes without having to stay on hold myself. Each state has different rules about how they want you to allocate income, so getting clarification directly from their tax departments can be really helpful before you file.

I have to admit I was totally wrong about Claimyr being a scam. After waiting on hold with Virginia's tax department for over 2 hours and getting disconnected TWICE, I was desperate enough to try it. Set it up around 9am while I started working on other things. About 90 minutes later (which I spent productively instead of listening to terrible hold music), I got a call connecting me directly to a Virginia tax representative. The agent confirmed that for my situation, I needed to use working days rather than calendar days, and explained exactly which form I needed. Ended up using it for North Carolina too and got through in about an hour. Saved me an entire day of waiting on hold. Just sharing in case anyone else is struggling to get answers from state tax departments.

One thing nobody's mentioned yet - make sure you check if there are reciprocity agreements between any of the states you worked in! Some states have agreements where you don't have to file in both places. For example, if you live in Virginia but work in DC, you don't have to file DC taxes because of their reciprocity agreement. Could save you from having to file some state returns altogether.

What tax software are you guys using for multi-state returns? I tried doing mine with TurboTax last year when I worked in 3 states and it got really expensive really fast because they charge extra for each state.

Just wanted to add another perspective from someone who's been through this exact situation multiple times. I've been a digital nomad for 3 years now with W2 income and have had to navigate this mess annually. A few additional tips that might help: 1. Start keeping a detailed location log NOW for next year - even a simple note in your phone each day saves massive headaches later. I use a shared Google Sheet that automatically timestamps entries. 2. Some states have "safe harbor" provisions where if you work less than a certain number of days (often 14-30), you might not owe taxes there. Worth checking each state's specific rules. 3. Don't forget about local taxes too! Some cities (like NYC) have their own income taxes on top of state taxes if you work there. 4. Consider talking to your employer about updating your state withholding if you plan to work in tax states regularly. Many payroll systems can handle multi-state withholding if you give them a heads up. The workday calculation method mentioned earlier is definitely the standard approach. Keep all those receipts and booking confirmations - even if you don't think you'll need them, having a paper trail is invaluable if questions come up later.