Employees are working remotely at an increasing pace. This remote work can sometimes mean that employees are relocating to states where the employer hasn’t had a presence, which has payroll tax implications for employers everywhere.
The increase in connective technology for the office, plus the Covid pandemic, fueled many changes for employers. Among them is the large increase in employees working remotely and relocating to other states. On the outset, it seems that a remote employee relocation is straightforward, as they can work on a laptop with a cell phone from any location. However, for employers there are payroll tax implications for their employees in these other states.
How Payroll Taxes Work for Small & Large Businesses
Employers turn to both their payroll managers and their accountants for help; however, payroll tax work falls outside of the scope of both professionals. Flex HR has a payroll tax department set up to manage payroll tax work for companies everywhere.
When an employee is hired or chooses to relocate to a state where the employer hasn’t previously had a presence there are multiple implications. The employer needs to do the following:
Once the appropriate numbers have been set up for the new state or states, the employer must review human resources compliance tracking items for the affected states. The employer also needs to update the employee handbook accordingly and monitor any standard operating procedures. This could involve the following:
- Need to post jobs with the salary disclosed
- Pay any unused PTO for the calendar year on termination date
- Make sure that rules are followed for the salary requirement for any hourly or exempt employees
- Ensure that proper documentation required at termination for an exiting employee
Why Outsource Payroll Taxes Processing?
When a company retains Flex HR for its payroll tax work, a comprehensive approach is taken. First, we set up an information gathering session to fully understand your payroll tax needs. We get a current employee census and determine where specific employees are located.
Next, we put together a plan for setting up current state tax-related payroll numbers and identify the priority for each state. This involves communication with various state and local agencies.
We work with your payroll manager to make sure all state payroll tax numbers are entered correctly in the system for any affected employees. Working with your HR manager, we ensure all state human resources compliance items are properly documented.
Flex HR is retained to go through prior payroll tax issues and any retroactive fees or penalties. We then care for the ongoing payroll tax issues at the company.
Employment – Federal, State & Local Taxes
Regardless of the state, there are general employment taxes that must be paid for by the employer. These include:
- Federal income tax withholding based on what the employee fills out in their W4.
- FICA (Federal Insurance Contributions Act), which includes social security and Medicare.
- FUTA (Federal Unemployment Tax Act), which is exclusively paid for by employers.
- State-related tax implications.
State-related tax implications are varied and can sometimes involve local municipalities. They include the following:
- Some states require employers to withhold state income tax, while other states don’t have a state income tax.
- Some cities have income taxes, which means it’s an additional wage withholding.
- There are other withholdings in various locations that can be required, including:
- Paid family leave
- Short-term disability
- Unemployment benefits
Employers across the country trust Flex HR with their HR and payroll issues. The payroll tax department and tax professionals within Flex HR can help employers immeasurably with recouping items owed and eliminating legal exposure.