People travel from all over the world to visit Montana. It is stunningly beautiful and consistently ranks as one of the best places to live in the United States. It comes as no surprise that Montanans have found themselves with an influx of new residents. These residents have made Montana their home while performing work for an out-of-state employer. As the pandemic continues to affect in-person business, many businesses have shifted their emphasis from where work is performed to how work is performed. As a result, employers and employees are coming to terms with a mobile workforce being the norm rather than the exception and navigating Montana Tax Obligations for Remote Workers.
Remote Work May Effect Your Income Tax Liability
One of the consequences of this remote work environment is the issue of residency and personal income tax liability. While some states have a de minimis, or a minimum number of days rule, when it comes to residency, Montana does not. Montana takes the approach that any individual residing in the state during any part of the calendar year must file and pay Montana state income tax on any wages received for work performed while in Montana.
Most states have similar rules as Montana. For example, an individual’s physical location during the performance of work dictates where the tax is due. However, not every state operates this way. Individuals may find themselves required to file state returns not just for Montana but also for the state where their normal business office was originally located and pay tax on the same wages to two different states.
While Montana has developed mechanisms to address these issues, the headache of navigating and reporting this on multiple income tax returns may be too much for individuals who are used to filing only one state tax return. With many employees working remotely much longer than initially anticipated, it is important to be informed regarding the tax obligations and benefits of being a Montana resident.
How to Know if the State of Montana Considers You a Resident
The following is a list of factors taken into account when determining if an individual qualifies as a resident of Montana. If you have one or several of the following, you are likely considered a resident of the state:
- Registering to vote in Montana
- Having a Montana driver’s license
- Having a Montana ID card
- Having a Montana resident hunting or fishing license
- Claiming Montana residency when applying for admission or financial aid at a Montana college or university
- Receiving services from a program administered by the Montana Department of Health and Human Services, which is only available to Montana residents
- Having a concealed weapon permit in Montana
- Claiming Montana residency for tax purposes in prior or current years
- Where an individual registers his or her motor vehicles
- Where an individual owns, rents, or occupies a developed real estate property, a mobile home, or a recreational vehicle with sleeping and cooking arrangements, during the tax period
- Where the individual regularly receives his or her mail
- The location of an individual’s principal place of business, profession, or occupation
- Where an individual’s professional licenses were issued and used during the tax year
- Where an individual obtains professional, financial, or healthcare services on a regular basis including, but not limited to, legal advice, accounting advice, dental care, or primary healthcare
- Where an individual attends or is a member of his or her place of worship
- The location of any social, fraternal, athletic organizations, clubs, or lodges in which the individual is a member
This is not a complete list, and a person does not need to meet all of the factors listed to be considered a resident. Each individual’s circumstances and intentions are considered when determining residency.1
The CPAs at Anderson ZurMuehlen are pleased to be a resource to you. If you have questions regarding how remote working may affect you, please contact us.
This article was written by Ryan Dixon, CPA and Supervisor in our Helena office.
1Montana Department of Revenue