Remote worker living in different state than employer - who handles tax withholding?

I just got hired for a fully remote W-2 position. The company is based in New York, but I live in Texas. They're withholding NY state taxes from my paycheck even though I've never set foot in New York and do all my work from my home in Austin.

Is this right? I thought remote workers only pay taxes in the state where they actually live and work. I don't want to deal with filing NY state taxes when I'm never there.

Texas has no state income tax so you got lucky there! But yeah, they shouldn't be withholding NY taxes if you're working exclusively from Texas.

Tell your HR to update your withholding. This is their mistake, not yours.

This is actually more nuanced than it seems. Let me break down the key issues:

First, you're right that generally remote workers pay taxes in their state of residence where they perform the work. Since you're in Texas (no income tax) working for a NY company, you typically wouldn't owe NY taxes.

However, there are some important exceptions:

• Convenience of employer rule: NY has this unusual rule where if you're working remotely for your convenience (not the employer's necessity), NY can still tax your wages. This is controversial but currently valid.
• Physical presence: If you ever go to NY office for meetings, training, etc., those days may be taxable in NY
• Company registration: The employer needs to be registered to withhold in your state of residence

Wait, the "convenience of employer" rule sounds insane. So NY can just tax me even though I don't live there and never work there?

The job posting was always listed as remote. I never had the option to work in their office. How can that be for my convenience?

I went through this exact thing last year. NY's convenience rule is real and it's aggressive. A few states have it (NY, NE, DE, PA, CT, NJ in some cases).

The good news: Texas will give you a credit for taxes paid to NY, so you won't be double-taxed. The bad news: oh wait, Texas has no income tax, so you just lose that money to NY.

I ended up negotiating a higher salary to offset the unexpected tax burden.

The convenience rule is indeed controversial. New Hampshire actually sued Massachusetts over a similar issue during COVID.

Here's what you should do:

1. Ask HR for documentation on why they're withholding NY taxes
2. Request a written statement that your remote work is required by the employer, not for your convenience
3. Check if they're registered to withhold in Texas (they should be, even though TX has no income tax, for federal reporting)
4. Consider having the company consult with a multi-state tax attorney

The employer has an obligation to withhold correctly. If you're truly working 100% from Texas with no office requirement, you should be able to challenge this.

Another thing to watch out for: some companies just default to withholding in their home state because their payroll system isn't set up for multi-state. It's lazy and wrong, but it happens.

I worked for a company that had remote workers in 15 states but their payroll provider only supported 3 states initially. Took them months to fix it.

Update: I talked to HR. They said it's "policy" to withhold NY taxes for all employees because that's where the company is incorporated.

When I pushed back, they said I could "sort it out when I file my taxes." That doesn't sound right...

That's not how it works. "Company policy" doesn't override state tax law. The employer has a legal obligation to withhold in the correct jurisdiction.

If they're telling you to "sort it out" at tax time, that means you'd have to:

• File a NY nonresident return to get a refund of taxes you never owed
• Wait months for NY to process the refund (they're notoriously slow)
• Deal with potential audits or complications

I'd recommend sending HR a formal written request citing that you work 100% from Texas, have no NY nexus, and under Pub 131 they should not be withholding NY taxes. Copy their legal/compliance team if possible.

If they refuse, you may want to consult with an employment attorney. Employers can face penalties for incorrect withholding.

This is exactly why I only work for companies in states with no income tax now (TX, FL, WA, NV, etc.). The multi-state tax thing is a nightmare.

I had a situation where I was working from California for a Colorado company, traveling to 5 different states for client work. My CPA bill that year was more than my gym membership. Not worth it.

Thanks everyone. I'm going to send a formal written request to HR and CC their legal team. If they don't fix it, I'll consult with an attorney.

This is a good reminder to clarify tax withholding during the offer stage for any remote position. Lesson learned.