Remote work is here to stay, and while it’s great for flexibility, it also comes with some tax headaches for business owners. If you have employees working from different states or even different countries, you could be juggling state tax laws, payroll compliance, and potential tax liabilities you didn’t even realize existed.
Key Tax Considerations:
State and Local Taxes
Each state has different regulations with taxation. Your company may need to withhold state taxes based on each employee’s location. You may need to register in each state to file accordingly.
Even if you are a small business and mainly operate in one state, it’s always important to consider local regulations for any of your full-time, part-time, or contractual employees. The same regulations are applicable for both small and large-scale businesses.
Payroll Tax & Withholding
Local tax laws vary per location. Employers must ensure the correct federal, state, and local payroll taxes are withheld.
We recommend outsourcing your payroll to a reliable payroll company to ensure the accuracy of these requirements. This is especially recommended for smaller companies that do not have the capacity or need to have a payroll-dedicated department. Transferring the burden of these tricky details to a dedicated company can help free your time to operate your business and ensure it’s done right from the start.
Double Tax Issues
Your company needs to ensure compliance; your employees might face double taxation for your home state of operation and the state(s) where your employees work.
Some states offer certain credits to avoid double taxation; however, it’s always important to check regulations for each state as they are constantly updating.
Home Office Deductions
In the past, employees were able to deduct certain expenses related to their home office. However, reforms and updates to law are continuously occurring. The Tax Cuts & Jobs Act has significantly changed the landscape of the past. Through 2025, most of these prior benefits are suspended (unless you are self-employed).
However, businesses can still reimburse employees for expenses that can be deductible for the company. Ensuring compliance is always key to getting the most with what’s legally compliant.
Hiring International Remote Workers
Ah, yes, outsourcing. A common practice we see more frequently even for local small businesses. Some owners may simply see the benefit of outsourcing for cheaper labor. International tax rules vary per country and require a global tax accountant. Businesses must ensure compliance with each government and verify foreign employees have appropriate and legal work visas with regard to their location.
Staying Compliant:
Consult a Tax Professional
Consulting a tax professional is imperative as the regulations and laws around this subject are constantly changing. You may require a certain type of tax professional depending on the situation of your business. It’s always best to invest the time to connect with a tax professional who can tailor their advice to your unique situation.
Create Clear Remote Work Policies
Establishing clear guidelines for remote work and any reimbursements your company plans to provide is important from the start. We recommend providing an outline of tax liabilities for your employees to ensure their obligations are transparent from the start. Lastly, state-specific policies may vary per state and require disclosure per law.
Use Payroll and Compliance Tools
Payroll software or relying on a professional payroll company is highly recommended. This will save you a headache down the road and ensure a professional takes care of this complicated and time-consuming job.
We hope this blog has shed light on understanding the implications and components within hiring remote workers. Whether a big company or small, it’s always important to consider regulations across states and remain compliant from the beginning.
Need more help or guidance with your business? Contact us today, and we’re happy to help.