Understanding tax laws and regulations has always been complex, even before the world’s digital age. Many businesses and individuals find it difficult to keep up with the economic changes happening around them, and remote work hasn’t made it any easier.
According to data from 2024, approximately 32.5% of San Francisco’s workforce is remote. Despite the large number of work-from-home employees, most still don’t understand the tax implications of remote work. If you are preparing to leave office life behind, know your California tax laws.
How Do Taxes Work for Remote Jobs?
Like anything, tax laws vary from state to state. The primary factor that determines how you are taxed is your physical location. So where do you pay taxes if you work remotely?
Workers are mostly taxed depending on where they live and work. However, if you work for a business in San Francisco but live in another state, you would be considered a nonresident, and tax implications would differ. To determine whether or not you pay employment taxes, California’s Employment Development Department (EDD) would consider the following factors.
- Physical service: As a nonresident, whether or not a remote worker performed physical service in the state of their business matters. If you work for a business in San Francisco but never physically work there, taxes don’t apply.
- Localization test: If a remote worker performs most of the physical work in California, those services will be taxed.
- The base of operations test: If the employee performs services in a state other than California or their home state, the EDD names California as the “base of operations,” meaning they are subject to taxes.
- Branch test: If the above tests don’t apply, the EDD goes off where the remote employee takes directions from. If workers take directions from a branch or office in California, they are subject to the state’s taxes.
Understand Tax Laws With SD Mayer & Associates
Taxes can be complicated, so stay updated on your state's tax laws and regulations if you are working remotely or looking to transition out of your in-person office. If you are a nonresident, ensure you know how taxes work when working remotely out of state.
If you are having trouble keeping up with tax implications or wondering how taxes work as a remote worker for San Francisco businesses, consider seeking help from a professional tax accountant. At SD Mayer & Associates, we can help you learn how to track your work-related expenses and save money on your tax return.
Contact us today for helpful remote work tips and more information about our tax services.
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DISCLAIMER:
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The services of an appropriate professional should be sought regarding your individual situation.
HYPOTHETICAL DISCLOSURE:
The examples given are hypothetical and for illustrative purposes only.
