Insider News & Announcements

Work Tax Concerns for Multi-State Employers

Let’s talk about that all important topic, Work Taxes, (this should be fun ) …..
The rise of remote workers in recent years and now with the pandemic has led to a dramatic increase of remote workers or work@home employees. Even before COVID-19, the popularity of teleworking was raising questions among tax experts as well as state and local jurisdictions about how to fairly and properly tax work@home employees. So much so, that the issue might already be headed to the Supreme court in Massachusetts v. New Hampshire. Why? Massachusetts wants to continue taxing workers that now work remotely as if they’re still working within Massachusetts, while New Hampshire, a no income tax state says Massachusetts is infringing on its sovereignty by taxing it’s residents that now work in New Hampshire. And now, more than 7 states have joined the lawsuit with potentially more to come aboard. So where does this leave employers and employees with multi-state employees working remote? Caught in the middle.

According to Eileen Sherr, CPA, CGMA, Director–Tax Policy & Advocacy, the Association of International Certified Professional Accountants in an article in the Journal of Accountancy, “The sudden and unplanned increase of many employees working remotely due to the pandemic has left many of them (accountants) unaware of their current state tax liabilities and any additional steps they need to take now and at tax filing time.” “CPAs should consider reaching out to their clients now to alert them of potential issues. You have until the end of the year to change your withholding or maybe pay an estimated payment to the state so that the state income tax liability won’t be a surprise in April.”

Well that clears everything up for employees…. (that’s sarcasm folks). But what about employers? Are they liable for any missed or incorrect work taxes or unemployment insurance? In a recent article in SHRM-Tax Headaches, “remote workers employed by an out-of-state business, a state where the employee is working “generally requires that the employer register for and pay the unemployment insurance premiums for the employee through the state unemployment insurance program where the employee is performing the services. Failure to do so may expose the employer to liability, including penalties for noncompliance with the state’s unemployment insurance laws.”

So how can large employers help themselves? Is there a way to avoid the potential legal and liability traffic jams by changing course? Yes, and the quickest and easiest method might be via technology. If employers integrate functionality into their HR and Payroll systems to help track salaried and non-salaried employees work locations as well maintain the proper tax configurations for each new work location, then they would be in a much better position from a compliance standpoint. Now this might sound like an easy task, but determining the correct state and local taxes, especially in northern states like Pennsylvania and Ohio can be daunting as well as potentially fraught with errors and inaccuracies. Will you have payroll validate each and every address in Pennsylvania to confirm which locality should be setup for that specific work location? What if an employee works in multiple remote locations and how to you split the tax distribution? Do you have a time keeping system that also tracks multiple work locations and do all employees utilize it? What if the employee changes their work location often? How can you report these location changes and setup associated taxes accurately and timely?

PS WebSolution has been working to solve these issues and we believe we have the solution; WorkSync v2.0, is an automated work tax and compliance solution for PeopleSoft (and soon Oracle HCM Cloud and Workday).

1) Allow employees, managers, and administrators maintain and report their physical work locations and work location percentages via a user-friendly wizard based, mobile self-service application.
2) Automatically setup and assign the proper state and local work taxes for employees based on the physical work locations, even if they work in multiple locations simultaneously.
3) Help employers accurately report employee work locations and work percentages.
4) Automatically configure and maintain work tax location features (i.e. Tax Location Codes) in PeopleSoft.
5) Multiple work location features to be load into tax-distribution or directly into the pay-line.
6) In conjunction with SmartTax W-4, full and automated tax compliance for work and residence tax automation and withholding forms.

Call or click today to setup a demonstration of SmartTax W-4 and WorkSync!

Written by Tyger Vollrath
Tyger Vollrath is the Founder and COO of PS WebSolution. He has over twenty years of experience with PeopleSoft and a frequent speaker and contributor of HCM content.

Images: “no copyright infringement is intended”

Request Information