How does Arizona tax remote workers?
There are a few situations to consider. You may fall into more than one category.
- I lived in Arizona.
- If you're considered a full-year or part-year resident of Arizona, you'll be taxed on all income earned from any source during your time of residency. Be sure to file the appropriate return.
- I worked remotely from Arizona.
- Arizona taxes income earned for personal services performed while in Arizona (even if you're a nonresident). This includes remote work for an employer or clients based outside Arizona if you were physically in the state while doing the work. Your employer is required to withhold Arizona income taxes once you have been working in Arizona for 60 days. If both your employer and you agree, withholding can start at the beginning of employment instead. Please check with your Human Resources Payroll department for withholding requirements in Arizona.
- You may be able to claim a credit for taxes paid to another state on your Arizona resident return for any income required to be reported in multiple states. Note, there are some nonresident state tax returns that do not allow you to claim the credit for state taxes paid on your Arizona Return. These states are California, Indiana, Oregon, and Virginia. However, you may be able to claim the credit for taxes paid to Arizona on those nonresident filing states.
- My employer was based in Arizona.
- If your employer was based in Arizona, they will have withheld Arizona taxes from your wages as shown on your W-2. However, as long as you didn't live or physically work in Arizona, you won't owe Arizona taxes on those wages and can file a nonresident return to claim a refund of those withholdings.
- If your employer didn't withhold Arizona taxes and you're a nonresident of Arizona, you probably don't need to file an Arizona return at all unless you otherwise have an Arizona nonresident filing requirement.
