this post was submitted on 31 May 2025
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Hello!

I am considering performing either contract or part-time employment with an employer in a different state (KY). I currently work full-time, remotely, in FL.

I believe because my residence is in FL that contracting will be my only option (due to employer rules on hiring out of state).

To contract, I believe I’d have to be a sole proprietor (I think) and submit a bid, etc.

I don’t need to do this financially - and am going to move to KY in the next year (making part time employment possible instead of contracting). In other words, I could just.. wait or not do this at all. My main goal here is just to make some extra money - but if taxes or something was going to make me miserable then I can just not do this.

Questions:

  • What effect would contracting in a different state have on my taxes?
  • Should I just wait til I move to KY and try to go the part-time employment option instead of dealing with the sole proprietorship?
  • Any other advice / thoughts you have?
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[–] [email protected] 9 points 3 weeks ago* (last edited 3 weeks ago) (3 children)

Advice you get on the Internet is worth what you pay for it. So what you should really do is talk to a local CPA. Everything I say below might be bullshit.

But, in general, you owe income taxes to the state where you live, not the state where your company is based. Two exceptions I know of are NY, which will insist on collecting non-resident income taxes from remote employees of NY companies, if their work duties do not require them to be there - it is confusingly called the "convenience of the employer" rule. The other exception is CA, which may require a remote employee to pay CA state taxes for work they do for a CA company while physically in CA. (So fully remote employees would be OK, but you might have to keep track of all the time you are present and working in CA).

However, this just covers who you owe taxes to. Smaller companies may not have the infrastructure to withhold for multiple states, and may be forced to withhold taxes for their state even though you technically don't owe that state any tax. Which may force you to pay estimated taxes direct to the state you live in throughout the year (effectively double-taxing you), but then you should be able to file a non-resident return in your companies' state to get a full refund.

My only experience with this was when I worked for a huge CA company with offices all over. They had an office in my state, so they were able to count me as a local employee there, even though I never worked in that office. They withheld the proper taxes and everything went smoothly. (Except for the fact that they never got my withholding right for my state, and withheld way too much...)

[–] [email protected] 4 points 3 weeks ago (2 children)

Appreciate the response even if it might be bullshit ;)

You have mostly confirmed what my research online has found.. which helps me at least feel confident in the steps I’d need to take.

Talking to a professional sounds like a smart idea.

[–] [email protected] 4 points 3 weeks ago (1 children)

Fwiw I've done contract work and I didn't need to be a sole proprietor or an LLC or a passthrough or anything, they just 1099'd me and I paid my own quarterly estimated taxes to the federal govt and my state of residence. I have seen places where you need to be an LLC and submit bids and all that, but that was company policy not a tax law.

[–] [email protected] 2 points 3 weeks ago

Tax-wise, the instant you earn contracting income you are a sole proprietor. There is no additional step required.