Do you have employees who live in one state and work in another? You may run into this if:
- Your company is located near a state border.
- You have employees who travel to job sites in other states.
- You have employees who work remotely.
- You are expanding into new states.
Having some basic understanding of what happens will help you make the right decisions about classifying wages and avoiding penalties or amended filings later.
Both state unemployment and withholding taxes should generally be paid to the employee’s work state, but there are exceptions; the twist is that state laws are quite literally all over the map. You may want to be familiar with the state legislation that applies to your team. Here are the basics.
Some states that border each other have entered into agreements related to allowing employees who live in one state but work in another, to have their withholding tax paid to the work state.
For example, an employee who lives in Maryland but commutes to northern Virginia or D.C. for a job can have withholding tax paid to Maryland rather than the work state. This is also known as courtesy withholding, and it means the employee can file one tax return each year, which helps simplify things. Have your employee complete a nonresidency certificate to excuse him/her from tax withholding in the work state. Let your payroll provider know that your employee has an agreement in place.
If there’s no reciprocal agreement, your employee will most likely have to pay both nonresident and resident state income tax. But luckily, most states grant a tax credit to cover the cost of being taxed twice.
Each state may have its own twist on taxation, so it’s best to check the local situation and not make any assumptions.
The unemployment tax situation is usually straightforward. When an employee is working in multiple states or working remotely for a company based in another state, you withhold state unemployment tax only in the state in which the employee is working.
When it gets complicated
Today’s remote-work world means situations that were rare or unheard of a generation ago are now commonplace. That means more tax complexity.
For example, consider an employee who works from his log cabin in upstate New York, but your company is located in Atlanta — you’ll have to pay all state taxes to New York because that’s where the work is actually being completed.
Or at that same Atlanta company, you have an employee who needs to work in Maine temporarily for three months. For nine months, you pay taxes in Georgia, and for three months, you pay taxes in the Pine Tree State.
Most of this information is general. It can get complicated, and there are exceptions and special circumstances. Be sure to let us know if you have a cross-border workforce, and we’ll help you organize your tax system accordingly.
- August 2018 (5)
- July 2018 (6)
- June 2018 (5)
- May 2018 (5)
- April 2018 (5)
- March 2018 (5)
- February 2018 (8)
- January 2018 (5)
- December 2017 (6)
- August 2017 (1)
- June 2017 (1)
- April 2017 (1)
- February 2017 (1)
- January 2017 (1)
- December 2016 (2)
- November 2016 (1)
- October 2016 (1)
- August 2016 (1)
- July 2016 (2)
- June 2016 (1)
- January 2016 (2)
- December 2015 (1)
- November 2015 (2)
- October 2015 (1)
- August 2015 (1)
- May 2015 (1)
- March 2015 (1)
- January 2015 (1)
- December 2014 (1)
- November 2014 (1)
- October 2014 (5)