Managing payroll for multi-state employees can be a complex and challenging task, but here at Lescault and Walderman, we’ve developed a list of helpful tips for our internal staff to simplify the process and ensure accurate and compliant payroll. Following are a few of these helpful tips:
First, investigate and list all related states/jurisdictions for each payroll employee. This allows you to quickly assess and track which areas you’ll need to further research and include.
Second, learn the individual taxes and requirements of each state involved. This may seem obvious, but preparing a list of requirements for each state and filing them with that individual client folder can help to streamline the entire payroll process. This list should include information/instructions on state income tax withholding, state unemployment insurance, state disability insurance, child support withholding, pay frequency, and state minimum wage.
Third, research and document the associated county and local payroll tax requirements. Some cities require the withholding of city income tax from the earnings of individuals living within their limits. In addition, some municipalities and counties have employment taxes which must be paid for each employee working in that city or county (these are not necessarily based on a percentage of employee earnings). These employment taxes (also called head taxes) may be paid by either the employee or employer depending on local statutes.
Next, prepare tax remittance and filing schedules (monthly, quarterly and annual), taking into account all of the state/jurisdiction and county/local requirements. This will allow you to remain properly prepared for the regular and timely execution and filing of all appropriate documents (such as the 940 below) and payments, regardless of the complexity and considerations of each individual case.
Finally, review and reconcile wages by state to make sure every individual employee is properly accounted for. This ensures the ultimate compliance for the entire payroll process and helps to identify issues before they arise.
As a regular part of the ongoing multi-state payroll process, those paying multiple states unemployment wages (e.g. those with employees working in multiple states) will prepare Schedule A on form 940 to report wages paid by state and calculate each appropriate state credit reduction. Form 940 is used to report all FUTA tax liability.
Fortunately, accounting software such as Quickbooks and Sage contain lists of common miscellaneous state and local taxes. These lists provide a good starting point to ensure compliance.
If you or your staff need assistance managing your payroll (single or multi-state), contact us at 866-496-2042. While it can seem like a daunting operational task, we can guide you safely through the challenges associated with multi-state payroll administration.
[schema type=”person” name=”Matt Lescault” orgname=”Lescault and Walderman” phone=”866-496-2042″ ]