My phone rang at 7am on a Tuesday. Never a good sign.
It was a client—a senior engineer at a fintech company, fully remote, been living the dream in Austin for two years. Great salary, no state income tax (thanks, Texas), life was perfect.
Except he'd just received a letter from New York. They wanted $47,000. Plus interest. Plus penalties.
"I haven't been to New York in three years," he said.
Didn't matter. His employer was headquartered in Manhattan. Under New York's "Convenience of the Employer" doctrine, his income was considered earned in New York—because he could have worked from the office but chose not to. Three years of unpaid New York state tax, compounding. The letter was not a request.
That call cost me my morning. But it taught me something I now tell every remote worker I meet: The state you live in doesn't care. The state your employer is in might own you.
What Actually Happened (The Dissection)
Here's what my client didn't know—and what nobody tells you in the "digital nomad lifestyle" articles.
When his company hired him, HR marked him as "remote - Texas" in their payroll system. Great. No state withholding. But they never updated their New York payroll registration. As far as New York State's Department of Taxation was concerned, he was a New York employee working from home.
New York has one of the most aggressive tax nexus doctrines in the country. If your employer has an office in NY and you're doing a job that could be done from that office, you owe NY taxes. Period. It doesn't matter that you're 1,500 miles away. It doesn't matter that you've never used the office. You owe.
Look, here's the thing most people miss: Tax nexus isn't about where you put your feet. It's about paperwork. And most HR departments suck at paperwork.
The States That Will Find You
I'm not going to pretend all states are equally dangerous. They're not. In my experience helping about 200 remote workers sort this out over the past five years, three states cause 80% of the problems:
The Dangerous Three:
New York — "Convenience of the Employer" doctrine. If you work for a NY company remotely, they claim you. Full stop.
California — The 45-day rule. Spend more than 45 days working from California, and you trigger a "presumption of residency." Then you have to prove you're not a resident. Guilty until proven innocent.
New Jersey — Locked in eternal border warfare with New York. If you live in NJ and work for a NY company, both states want a piece. You'll spend hours on reciprocity forms.
The Aggressive Tier:
Massachusetts, Pennsylvania, Illinois, Oregon, Minnesota, Connecticut. All have remote worker provisions that can bite you.
The Safe Harbors:
Texas, Florida, Nevada, Wyoming, Tennessee, Washington, South Dakota. No state income tax. This is where you want your domicile.
The "30-Day Rule" Is Bullshit
I hear this constantly: "As long as I'm in a state less than 30 days, I'm fine, right?"
No. Absolutely not.
New York can tax you after one day if you maintain a "permanent place of abode" there (even a friend's apartment where you stay regularly qualifies). California's 45-day threshold is a presumption, not a safe harbor—you can still be taxed below it if they can prove you were working.
The only number that matters is 183 days, and that's for statutory residency—a much higher bar than filing obligation.
My rule for clients: If you're going to work from a high-tax state for more than a long weekend, assume you'll need to file something. Budget for it.
The Case Study: How We Actually Fixed It
Back to my client with the $47,000 bill.
What went wrong:
- Employer never properly registered his remote status with NY
- He never filed a non-resident return in NY (which would have shown $0 NY-source income if done correctly)
- NY assumed he was a regular NY employee who just stopped paying
What we did:
- Hired a tax attorney specializing in multi-state disputes ($8,000—yes, really)
- Filed amended returns for all three years showing he was a bona fide Texas resident
- Documented his physical presence in Texas (flight records, credit card statements, gym membership, voter registration)
- Argued that his role could not be done from the NY office due to time zone requirements (this was a stretch, but his team was global)
The result:
- NY reduced the assessment to $12,000 (still painful, but better than $47k)
- He paid, and immediately had his employer update his payroll classification
- He also got his employment contract amended to explicitly state he is not expected to work from any NY location
Total cost: About $20,000 in fees and settlement. That's the tax on thinking remote work was simple.
What You Should Actually Do
I'm not going to give you a 47-step checklist. Here's what matters:
If You're W-2 (Employee)
Read your employment contract. Does it specify where you're expected to work? If it says "remote" without a state, fix that immediately.
Check your W-2 Box 15. This shows which state(s) your employer is reporting your income to. If it shows a state you don't live in, you have a problem.
Before you accept a remote job, ask HR: "How will you handle state tax withholding if I live in [State X] and you're headquartered in [State Y]?"
If they fumble the answer, that's a red flag.
If You're 1099 (Contractor)
You have more control. Form an LLC in a no-tax state (Wyoming is my go-to), establish domicile there, and make sure all your contracts are with the LLC, not you personally.
But here's the catch: if you personally perform services in a taxable state, you may still owe. The LLC doesn't magically erase your physical presence.
The Digital Nomad Fantasy (And Reality)
Can you actually work from anywhere and pay no state taxes? Technically, yes. But it requires discipline most people don't have.
The requirements:
- Establish domicile in a no-tax state (driver's license, voter registration, bank account, doctor, etc.)
- Never spend more than 182 days in any single taxable state
- Keep meticulous records proving where you were every day of the year
- Avoid any "ties" to high-tax states (property, spouse working there, kids in school)
Most people screw up #2 or #3. They spend the winter in California, don't track their days, and suddenly they're California residents.
(Side note: I think the whole "work from a beach in Bali" trend is mostly people who haven't thought about the tax implications. Indonesia has a 183-day residency threshold too. But that's a different article.)
FAQ
Can my employer force me to pay taxes in their state?
Not directly, but they control the paperwork. If they classify you as working from their office location, you're stuck fighting that classification. Handle this at the offer stage, not after.
Is it worth hiring a CPA for remote work taxes?
If you work for a company in a different state than where you live: yes, absolutely. $500-1,000 for a CPA who specializes in multi-state taxation will save you multiples of that in avoided mistakes.
What about working from other countries?
That's a whole different beast. You may qualify for the Foreign Earned Income Exclusion ($126,500 tax-free in 2026) if you're abroad 330+ days. But you'll trigger local tax obligations in most countries. Get an international tax specialist.
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