Ask HR: Where Do Remote Employees Pay Taxes?

​SHRM President and Chief Executive Officer Johnny C. Taylor, Jr., SHRM-SCP, is answering HR questions as part of a series for USA Today.

Do you have an HR or work-related question you'd like him to answer? Submit it here. 

I recently moved to a new state and now work remotely for a company based in my former state. My local taxes are still paid to the former state. Is this correct? Should I request any adjustments? Am I responsible for any mistakes my employer might make concerning taxation? —Denise

Johnny C. Taylor, Jr.: I appreciate you reaching out about this timely topic. Many employers and employees underestimate the tax implications of remote work. With the massive shift to remote and hybrid work, a number of people are reconsidering many life choices, including where they live. Not surprisingly, this virtual migration is pushing implications like tax withholding to the forefront. Employers faced with a myriad of shifting workplace realities are hard-pressed to keep up with some of these taxation complications.

While I can't speak to the specific details of your circumstances, it seems likely your employer will need to adjust your tax withholding, especially if you have moved to a state different from the one you previously lived and worked in. What adjustments need to be made will depend chiefly on state and local tax laws governing your new residence.

Employees' state of residence and the state where they work affect which state and local taxes they pay. Sometimes, if employees live in one state but have been working in another, they'll receive a credit on their resident tax return to offset the nonresident state tax liability. But that's not always the case, as different states have different laws. 

Also, should you perform work onsite with your employer, you could again be subject to tax liability in the employer's state. Your tax liability could be triggered by the amount of time worked or income earned. States vary significantly in thresholds requiring taxation of nonresidents.

Speak with your HR department about your move. Always make sure they have the most recent information regarding your residency. Verify your employer is re-evaluating and making necessary adjustments to your tax withholding.

Your employer should initiate a tax compliance review when it is made aware of a remote employee's new location. It should also review state and local tax laws as they apply. In addition, I encourage you to follow up with a certified tax professional who is familiar with your new state and local taxation regulations.

While it is the employer's responsibility to apply tax law correctly, any missteps it makes will ultimately impact you financially. So be sure to verify, validate and follow up on any action taken to ensure the proper result. Congratulations on the move and good luck.

I recently had to take leave to respond to a subpoena. Can my employer force me to apply vacation time for the time off? —Kelly

Johnny C. Taylor, Jr.: The short answer is yes, your employer can require you to apply your vacation time to comply with a court order. However, it is not necessarily the best course of action for a number of reasons. For starters, it penalizes the employee for complying with civic duty.

Typically, employers should support workers' efforts to accommodate court orders. Though they aren't obligated to, many employers not only allow for time off, but also offer paid time off in these situations.

Verify your employer's decision is consistent with its written policy and procedure. If you are still uncertain, reach out to your HR department for clarification.

Generally, paid time off for a court appearance can range from a few days to weeks at a time. Employers will usually request documentation of the subpoena before approving your leave and corresponding pay.

Keep in mind, many states have laws to regulate witness and/or victim leave for court attendance. So, your employer's standing policy in this situation may depend on such regulations.

Additionally, salaried employees have some protection under federal statutes. Under federal law, employers are not allowed to reduce salaried workers' earnings due to partial workweek absences based on court appearances.

Again, review your employer's policy to confirm your options and check with HR to answer any unresolved questions. I wish you the best outcome possible.