Do you have employees working in multiple states?
Employees who are working in multiple states create two key issues:
- Which state(s) should your business withhold taxes for those employees?
- Which state should your business pay the unemployment taxes?
In general, if employees live in a state different from the company’s location(s) then withhold tax in the employees’ place of abode. Unfortunately, the state withholding requirement(s) can be complex. Businesses will need to review any reciprocity agreements between states. If no reciprocity agreements exist, then review the states’ requirements. If an employee spends more than 183 days (about 6 months) in a state, they are generally considered residents. In addition, some states have the “Convenience of the Employer Rule.”
For remote employees if the company has nexus in the employees’ residency states, then it needs to withhold in that state. If no reciprocity agreement exists and no nexus, no requirement to withhold. If employees are working hybrid, then they must review the business’s state requirements and the employees’ state requirements.
As far as unemployment is concerned, this is normally paid to the state where the employees reside unless a reciprocity agreement between states exists.
If you are unsure whether you are properly withholding for your employees, please call Susan at 630.523.5762. For more helpful tips on becoming a highly profitable business owner, check out Highpoint Advisory Services.