If your employer is outside the state where you are living, there may be tax consequences, and that could be facing double taxation.

Double Taxation: Convenience of the Employer Rule

You could face double taxation if your company is outside the state where you worked in 2023. Being a hybrid worker might also mean you get ripped. The double taxation is based on the “convenience of the employer” rule. Based on the article of Yahoo Finance.

According to Garrett Watson, an analyst at Tax Foundation “If your employer is in one state and you live in another state as a remote worker, there are six states that have ‘special convenience of employer’ rule, those states are Connecticut, Delaware, Nebraska, New Jersey, New York, and Pennsylvania.”

If your employer is based in one of these states, but you work out of the state remotely for your convenience, then you might be subject to double taxation in the state you live in and the one where your employer is based. “The convenience rule can result in individuals paying state income tax on more than 100% of their wage income due to the lost out-of-state credits on their resident state tax returns,” said Mandy R. Riles, a tax manager at WIPFLI.

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Some taxpayers may be able to avoid double taxation through state reciprocity agreements

Reciprocity agreements can avoid double taxation if workers are taxed once in the state in which they live.

According to Tom O’Saben, an enrolled agent and director of tax content for the National Association of Tax Professionals “For example, if you live in Quincy, Illinois and work in Davenport, Iowa, Iowa has a reciprocal arrangement with Illinois so Iowa does not tax that income, and all taxation occurs in Illinois, the worker’s home state,”.

If you are a hybrid or remote worker, you must check with the company’s HR department to see if there will be additional state withholding for the non-resident state.

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