2023 BLOG THREE

One of the drawbacks of having remote employees in the US  is double taxation. Double taxation occurs when two states tax employees twice on the same income. It occurs when an employee works in one state and lives in the other. If your employee lives in a different state from where your business is, you may run into issues with double taxation. How do you prevent double taxation while complying with the IRS?

Ideally, a state reciprocal agreement would protect you and your employee from double taxation. But if a state doesn’t have a reciprocal agreement, you must withhold taxes based on where your employees render their services. Once you have determined the residency of your employee, you can determine the states the taxes are withheld from.