February 8, 2023

Dyers Ville

Business and General

How To Comply With Complex Multi-state Tax Laws

How To Comply With Complex Multi-state Tax Laws

Any business with one or more employees cannot fail to worry about the payroll. It does not matter how many employees you have; all the staff members need to be paid the correct amount on a timely basis. If you are looking for the best of the best payroll in US then you’ve found it!

Nonetheless, how businesses manage their payrolls is defined by specific rules and regulations that vary between countries. In the United States, these laws vary between states, affecting how US-based businesses in different states run their payrolls.

The payroll laws in the United States are so different that a business paying its staff members in various parts of the country might end up dealing with international payroll from a dozen other foreign countries. In addition, deductions and withholding taxes for all the staff members in different states must be incorporated in the calculations, making handling a multi-state payroll too tricky and time-consuming.

In 2021, the government passed The Mobile Workforce State Income Tax Simplification Act of 2021 to make the compliance procedure easy for employers located in more than one state or with staff members that are not always based in the same state as they were before.

This bill protects a staff member’s wages from being subjected to income tax in another state apart from the state of the employee’s residence and the state where the employee is based and conducting their employment responsibilities for over 30 days in the calendar year.

Employers must comply with the payroll regulations to avoid facing substantial fines and penalties if they fail to meet a deadline or submit the required documents.

However, some circumstances still make it difficult to follow the required payroll tax procedures. For example, an employer may lack a conclusive solution for their employees based in some states…

The question is, how does one identify the right place to start?

Understanding State-specific Payroll Taxes

Before we get into the finer details of multi-state payroll, we should first go back and highlight the state-specific payroll tax obligations on employers. Some obligations, like federal taxes, are mandatory and do not vary from state to state; however, our focus is on the tax obligations likely to surprise you if you are unfamiliar with each state’s laws.

The employer is responsible for state tax withholdings for each employee at the point of salary payment. State tax withholdings include temporary disability insurance, state income tax, state unemployment benefits, and paid medical or family leave.

Many states mandate employers to withhold state-specific income taxes from every staff member’s monthly salary. Nonetheless, nine states in the US do not have an income tax or will only tax income streams from certain types of investments. In addition, these nine states require employers to pay federal unemployment tax (also called ‘FUTA’) and state unemployment tax (also called ‘SUTA.’). In other states, the law expects employers to withhold state unemployment tax from employees’ wages, which are later paid to the state.

States laws in California, Hawaii, New York, and New Jersey also mandate employers to withhold deductions from their staff members to be channeled towards every state’s temporary disability insurance benefits programme, called the ‘TDI’ programme. In addition, employers with staff based in Connecticut, Rhode Island, and Massachusetts must withhold and remit family and medical contributions subtracted from your employees’ monthly wages.

Every state develops a particular set of payroll taxation guidelines for employers to think about. Most of the laws are easy to understand, while others might require input from a professional. Nonetheless, you can expect to deal with different payroll laws if you pay staff members in different parts of the United States.

We encourage you to talk to TopSource Worldwide today and let us help you navigate the complex multi-state tax compliance system for you as you concentrate on taking your business to new horizons. Call us today and learn more about our international payroll services.