The past two, nearly three years has drastically changed how many of us work. Many, if not all of us experienced working from home and many continue to work from home – part time or full time. While tax implications of working from home may be at the very bottom of your list of concerns during tax season, it is something to consider. We’ll cover what you should know about it and how it could affect you or your employees.
The Rise of Working from Home
Before the pandemic, some of us may have dreamt of being able to work from home, some might’ve been lucky to do it some but not full time. Even with concerns around covid declining many are still working from home – due to the convenience or they find it more efficient to take the commute time out of their day. Some employers have even changed their work structure to allow for more remote work or tele-work options. While working from home for many came out of necessity, it appears that working from home is here to stay.
How Do Taxes Fit In?
There are a few things to consider with your taxes besides the norm when it comes to working remote. In addition to income tax there could be additional taxes or taxes for working in multiple jurisdictions. Now, not all of these will apply to everyone and chatting with your employer and/or accountant will save you a lot of confusion. Depending on where you are working compared to where your office is located, you may have to pay income tax in two different locations or jurisdictions. This is one that should be discussed with your accountant as they can help you navigate this and understand which jurisdictions you owe taxes in.
If you are self-employed, some of your expenses used for working from home can be deducted. There have been a few changes over the years as to what job-related expenses employees can take as deductions so double check with your accountant and on the IRS website to confirm what you can and cannot deduct.
How to Keep Track and Report
Good records are going to be your ally and make your life easier when it comes to filing your return. Keep copies of receipts – digital is okay – along with a note as to what it was for. When working remotely, it may be helpful to track which days you worked and if you worked any in a different state than the one you reside/work in. Any miscellaneous information such as milage to meet with clients or purchases needed to work remotely should be recorded so you can include them with your deductions. You can also chat with your accountant to learn what else you should keep records of when working from home – your state may have additional deductions or tax considerations, so lean on your accountant’s knowledge.
Looking for More Information?
Our team, just like many others, have gained a lot of firsthand experience about working from home. And being in the tax industry it has given them an even deeper understanding of how working from home can affect your taxes. This blog is a great place to start, but if you find yourself with remaining questions or want specific answers for your business and/or employees, reach out! You can contact us or call us at (703) 912-7862, or schedule a meeting with one of our staff.