Fundamentals and Best Practices for Handling Taxation of Multistate Employees
Webinar Details $219
- Webinar Length: 100 Minutes
- Guest Speaker: Vicki Lambert
- Topic: Taxation and Accounting, Human Resources, Payroll
- Credit: CPE 2.0, HRCI 1.5, SHRM 1.5, ATAPR 1.5, RCH 1.5, ATAHR 1.5
This webinar discusses the handling of state taxes, wage and hour law, and garnishments when an employee lives in one state and works in another or works in two or more states simultaneously. Includes determining liability as an employer, reciprocal agreements, resident and nonresident taxation, Form W-4 equivalents, state unemployment insurance, wage and hour law requirements and garnishment withholding including the effects of COVID-19 on these areas!
Complying with the tax code, tax withholding requirements and deposit schedules for the IRS and one state is complicated enough. But for the multistate employer, multiply this by 5, 10, or 20 or even 50 and it can turn into a payroll department's nightmare. Add a pandemic to this mix and you can have the makings of a horror movie! Not only are there more rules and regulations to comply with, but the penalties can multiply if mistakes are made.
All payroll professionals must know the taxation and reporting requirements for all states where the company has employees working or in the case of reciprocal agreements, living. But for the payroll department that must handle employees who work in multiple states simultaneously or who travel to different states at different times for the employer the taxing and reporting requirements can become an arduous task at best and at worse a total fiasco. Employees working from home can add even more to the complexity! Questions must be answered, sometimes on an employee by employee or even tougher on a case-by-case basis for an individual employee. Which state income tax is withheld? Does it matter if the employee is a resident or a nonresident of the state? Are there any reciprocal agreements in effect that must be taken into consideration? Which state do we pay the SUI to and what happens if one of the states has disability insurance but the other doesn’t? Or worse yet what if both states require disability insurance to be deducted?
Some employers may even think they have solved this logistics and regulations nightmare by simply withholding the income for and paying the SUI over to the state where the employee lives. And this might appear to be good in theory but in actual practice it is an audit disaster waiting to happen and happen it will. Only if the employee is performing some work in the state in which they live would the employer have a hope of passing the audit for paying the SUI. But when it comes to state income tax audits it won’t even come close. Most states require state income tax withholding for wages paid for work performed in the state. The only ground given in this area is usually for reciprocal agreements and nonresident employees who may be in the state for a limited time. No, the only way to determine the proper taxation for multiple state employees is by researching and apply the requirements for each state. And this is where this webinar will help. This webinar will cover the intricacies and requirements that must be addressed by the multistate employer.
Also, an employer with employees working in multiple states does not just have taxes to deal with. Now there are also wage and hour laws to contend with! In a different (read: higher) minimum wage? Are the overtime rules different? Would that employee still be exempt?
Areas covered in this webinar:
- How to determine state withholding liability
- Who is a resident
- How reciprocal agreements affect taxation of wages
- Resident and nonresident taxation policies
- The four-factor test for state unemployment insurance
- Income and unemployment taxation of Fringe benefits
- What wage and hour laws must be followed
- How to handle income and unemployment insurance taxation for employees working in multiple states
- How working in multiple states could affect withholding for garnishments
- Withholding requirements when an employee is in a state temporarily
- Which states require the use of their own Withholding Allowance Certificate, which states allow either theirs or the Form W-4, and which states do not have a form
- Reporting wages for multistate employees on Form W-2
- How COVID-19 affects teleworkers who are in a different state
By the end of this webinar the attendee will have:
- Gained knowledge of the requirements under wage and hour laws when an employee works in two or more states
- Learned how to handle garnishment withholding for a multistate employee
- Understand how to determine state withholding liability and how it is affected by the residency of the employee
- Gained knowledge in reciprocal agreements and the difference between taxing residents on their worldwide income and nonresidents on the income earned within the state
- A better knowledge of the three calculation methods permitted to determine taxable wages for state income tax including the volume of business ratio method and the time basis method
- A clear understanding of the basics of the four-factor test used to determine the payment of state unemployment insurance
Who will Benefit:
- Payroll Executives/Managers/Administrators/Professionals/Practitioners/Entry Level Personnel
- Human Resources Executives/Managers/Administrators
- Accounting Personnel
- Business Owners/Executive Officers/Operations and Departmental Managers
- Attorneys/Legal Professionals
- Any individual or entity that must deal with the complexities and requirements of paying employees in multiple states
- Our Focus For Today 00:01:24
- Our Example For Today 00:06:59
- Are You an Employer? 00:07:43
- Are You an Employer? (Cont’d) 00:07:53
- State Income Tax 00:12:59
- Examples of Local Employee Withholding Taxes 00:16:33
- Examples of Local Employer Taxes 00:17:17
- Status of IRC Conformity 00:18:27
- 2023 Supplemental Taxation Methods by State 00:20:41
- Determining State Withholding Liability - Are You an Employer? 00:22:54
- In Other Words 00:26:18
- To Determine Withholding 00:27:43
- Making the Determination on Taxation 00:30:16
- Resident vs. Nonresident 00:30:51
- Definition of Resident 00:33:06
- Example: Withholding in NJ for SIT 00:33:49
- Are You an Employer in NY for SIT or City Income Tax? 00:35:49
- Are You an Employer in CT for SIT? 00:36:47
- Are You an Employer in NJ for SUI/TDI? 00:40:01
- Are You an Employer in NY for TDI? 00:42:30
- Are There Any Local Taxes? 00:43:42
- Telecommuting 00:44:35
- Telecommuting (Cont’d) 00:52:20
- Reciprocal Agreements 00:55:54
- Reciprocal Agreements (Cont’d) 00:56:22
- Reciprocal Agreements Chart 00:56:53
- For Example 00:57:13
- Form W-220 00:58:29
- Wisconsin Requires 00:58:59
- Arizona Example 01:00:24
- Arizona 01:01:44
- Arizona (Cont’d) 01:02:35
- Arizona Example That Meets the Criteria for Not Withholding AZ SIT 01:02:52
- Another Example: Nebraska 01:03:54
- Connecticut Example 01:06:20
- Maine Example 01:06:28
- Maine Example (Cont’d) 01:06:56
- The Forms 01:06:57
- Employee Withholding Certificates - The States 01:07:34
- Examples 01:10:08
- Form W-4 Equivalents 01:11:34
- Possible Other Forms on State Level 01:11:45
- Example of Exempt Form for Military Spouse 01:12:07
- Example of Nonresident Form-CT 01:12:44
- So What Do We Need for Our HR Manager? 01:13:01
- Taxable Wages 01:13:38
- Guidelines - Employees Working in 2 or More States 01:14:06
- Volume of Business Ratio 01:15:54
- Time Basis 01:16:24
- Mileage Basis 01:17:21
- Reporting 01:17:41
- Our HR Manager Example 01:17:57
- Form W-2 Reporting Resident of NJ 01:18:38
- For NJ We Would See 01:18:48
- NY Example - Nonresident 01:19:49
- For NY We Would See 01:20:02
- Connecticut Nonresident Example 01:20:13
- For CT We Would See 01:20:17
- HR Manager’s Form W-2 01:20:21
- State Unemployment Insurance 01:21:20
- Four Factor Test for SUI 01:21:25
- Four Factor Test for SUI (Cont’d) 01:21:44
- Localization of Services 01:22:53
- Example 01:23:14
- Base of Operations 01:23:33
- Example 01:23:45
- Place of Direction or Control 01:24:19
- Example 01:24:45
- Place of Residence 01:25:59
- Example 01:26:06
- Reciprocal Coverage Agreements 01:26:29
- Example 01:27:31
- And Finally 01:28:36
- Common Mistakes 01:28:46
- Wage and Hour Law 01:29:31
- Minimum Wage 01:29:35
- Minimum Wage By State 01:29:39
- Current State Minimum Wages 01:30:19
- Tip Credit Against Minimum Wage Map 01:31:15
- Meals and Lodging Credits Against Minimum Wage Map 01:32:28
- Mandatory Paid Sick Leave 01:32:57
- Pai Sick Leave By State 01:33:08
- Mandatory Sick Leave Chart 01:33:39
- Meals and Rest Periods 01:33:44
- Meal Period by State 01:34:14
- Rest Periods 01:36:32
- Frequency of Wage Payments 01:37:36
- Frequency of Wage Payments (Cont’d) 01:37:38
- Exempt Employee Regs 01:37:48
- Where the States Stand 01:37:55
- Where the States Stand - Current Rules for EAP Employees 01:29:09
- For Example: AK 01:39:17
- For Example: Washington -01:39:29
- Garnishments 01:39:45
- Creditor Garnishment Limits by State 01:39:49
- Limits on Child Support 01:40:09
- Child Support Limits by State 01:40:33
- What About Covid 19? 01:40:36
- Useful Links 01:40:47
- Attendee Questions 01:40:31
- Speaker Closing 01:50:19
- Presentation Closing 01:50:50
- Arizona Form A-4 01:10:11
- California DE4 Form 01:10:26
- Disposable Income 01:40:22
- Exempt 01:11:53, 01:12:16, 01:37:55
- Form CT-W4 01:12:51, 01:13:26
- Form CT-W4 01:12:53, 01:13:30
- Form IT-2104 01:13:15
- Form IT-2104 01:13:21
- Form W-2 00:58:46, 01:17:52
- Form W-220 00:58:59
- Form W-4 00:05:07, 01:07:10, 01:13:03
- Fringe Benefits 01:28:51
- Garnishments 00:06:40, 01:39:45
- Internal Revenue Code (IRC) 00:
- Liability 00:04:28
- Minimum Wage 01:29:39, 01:32:18
- Nexus 00:26:26, 00:30:34
- Nonresident Alien (NRA) 00:04:55, 00:29:57, 00:36:21, 01:13:20
- Reasonable Cause 01:32:40, 01:33:58
- Reciprocal Agreements 00:04:48, 00:26:39, 00:39:31, 00:55:54, 00:56:53, 01:12:04, 01:26:32
- Resident Alien 00:04:52, 00:29:57
- State Unemployment Insurance (SUI) 00:05:38, 00:39:19, 01:21:17, 01:26:42
- Temporary Disability Insurance (TDI) 00:41:50, 01:21:17
- Wage 00:25:30, 01:29:09
Arizona Form A-4: Arizona law requires your employer to withhold Arizona incometax from your wages for work done in Arizona. The amountwithheld is applied to your Arizona income tax due when youfile your tax return. The amount withheld is a percentage ofyour gross taxable wages from every paycheck. You mayalso have your employer withhold an extra amount from eachpaycheck.
California DE4 Form: This certificate, DE 4, is for California Personal Income Tax (PIT) withholding purposes only. The DE4 is used to compute the amount of taxes to be withheld from your wages, by your employer, to accurately reflect your state tax withholding obligation.
Disposable income: Disposable income is the portion of an employee's paycheck that is subject to garnishments. This portion is what remains after the following amounts are deducted from their gross earnings for a given pay period. Voluntary deductions, such as 401(k) contributions, are considered part of disposable income.
Exempt : Exempt employee is a term that refers to a category of employees set out in the Fair Labor Standards Act. They do not receive overtime pay, nor do they qualify for the minimum wage
Form CT-W4: Employee's Withholding Certificate, provides your employer with the necessary information to withhold the correct amount of Connecticut income tax from your wages to ensure that you will not be underwithheld or overwithheld.
Form CT-W4NA: Form CT-W4NA, in addition to Form CT-W4, Employee's Withholding Certificate, will assist your employer in withholding the correct amount of Connecticut income tax from your wages for services performed in Connecticut.
Form IT-2104: This certificate, Form IT-2104, is completed by an employee and given to the employer to instruct the employer how much New York State (and New York City and Yonkers) tax to withhold from the employee's pay. The more allowances claimed, the lower the amount of tax withheld.
Form IT-2104.1: NYS, NYC, and Yonkers Non-Residence Certificate - Use to determine your tax withholding allocations if you work in NYS, NYC, or Yonkers but are not a resident of NYS.
Form W-2: Form W-2 is an Internal Revenue Service tax form used in the United States to report wages paid to employees and the taxes withheld from them. Employers must complete a Form W-2 for each employee to whom they pay a salary, wage, or other compensation as part of the employment relationship. - Wikipedia (https://en.wikipedia.org/)
Form W-220: NONRESIDENT EMPLOYEE’S WITHHOLDING RECIPROCITY DECLARATION - THIS DECLARATION MAY ONLY BE USED BY A NONRESIDENT WORKING IN WISCONSIN WHO IS A LEGAL RESIDENT OF ILLINOIS, INDIANA, KENTUCKY, OR MICHIGAN.
Form W-4: Form W-4 (otherwise known as the "Employee's Withholding Allowance Certificate") is an Internal Revenue Service (IRS) tax form completed by an employee in the United States to indicate his or her tax situation (exemptions, status, etc.) to the employer.
Fringe Benefits: An extra benefit supplementing an employee's salary, for example, a company car, subsidized meals, health insurance, etc.
Garnishment: A legal summons or warning concerning the attachment of property to satisfy a debt
Liability: In financial accounting, a liability is defined as the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other yielding of economic benefits in the future.
Minimum Wage: The lowest wage paid or permitted to be paid specifically fixed by a legal authority or by contract as the least that may be paid either to employed persons generally or to a particular category of employed persons.
Nexus: The term nexus is used in tax law to describe a situation in which a business has a "nexus" or tax presence in a particular state or states. A nexus is basically a connection between a taxing jurisdiction, like a state, and an entity like a business that must collect or pay the tax.
Nonresident Alien (NRA): This income is taxed at a flat 30% rate, unless a tax treaty specifies a lower rate. Nonresident aliens must file and pay any tax due using Form 1040NR, U.S. Nonresident Alien Income Tax Return or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents.
Reasonable Cause : Reasonable cause is based on all the facts and circumstances in your situation. The IRS will consider any reason which establishes that you used all ordinary business care and prudence to meet your federal tax obligations but were nevertheless unable to do so.
Reciprocal Agreements: A reciprocal agreement, also called reciprocity, is an agreement between two states that allows residents of one state to request exemption from tax withholding in the other (reciprocal) state. This can save you the trouble of having to file multiple state returns.
Resident Alien : A resident alien is a foreign person who is a permanent resident of the country in which he or she resides but does not have citizenship. To fall under this classification in the United States, a person needs to either have a current green card or have had one in the previous calendar year.
State Unemployment Insurance (SUI): The Federal-State Unemployment Insurance Program provides unemployment benefits to eligible workers who are unemployed through no fault of their own.
Temporary Disability Insurance (TDI): Temporary Disability Insurance provides cash benefits to workers who suffer an illness, injury, or other disability that prevents them from working, and wasn't caused by their job.
Wage: A fixed regular payment, typically paid on a daily or weekly basis, made by an employer to an employee, especially to a manual or unskilled worker.