With big name companies extending work-from-home until the end of the year, next summer, or as an option for a growing number of workers, forever, ad hoc accommodations no longer seem sufficient—on either a personal, or a tax policy level.
Increasingly, the lines between employees and independent contractors (or freelancers) are becoming blurred. To be clear, you are not self-employed just because you are working from home. If you are receiving a paycheck from an employer, and those wages will be reported to you and to the Internal Revenue Service on a W-2, you are an employee. Working from home is not enough, on its own, to make you an independent contractor receiving a 1099. Why does it matter? As a result of the Tax Cuts And Jobs Act (TCJA), a.k.a., the Trump tax cuts, for the tax years 2018 through 2025, you cannot deduct home office expenses if you are an employee. There is no hardship exemption or coronavirus waiver. It's a very bright-line rule: employees who work from home can no longer claim the home office deduction. The reason you are working from home does not matter to the IRS.
It's not just the home office deduction that is creating confusion among those working from home. Employees who normally work in an office in one state, but live (and are now working from) another may be facing additional tax-filing complications. Bottom line: there is currently no national standard for the withholding, filing and payment of state income taxes for employees who work in more than one state or work in one state and live in another. That means you may have tax requirements where you typically work as well as where you live. Usually, you can sort that out via withholding, tax agreements, and credits.
So what if working at home in one state when your company is in another state means that you're subject to tax in both places? If either state has a physical presence rule (most states do), figuring the split between the two can be confusing. Typically, you may have too much tax withheld from your paycheck for your nonresident state and not enough for your resident state.