The world of work is going through a phase which is amorphous and looks mobile as companies see their employees scattered. Some of their employees work from home two days a week. Some live across the country, and some make a 100kms plus travel to their workplace each and every morning. This means we’re in an age of workplace flexibility with an arduous payroll processing. Live and work state taxes are one of the major problems. It is the job of both HR and payroll professionals to know where people are working, what taxes to file, and how to manage their new world of work.
First of all, you should identify which states give reciprocity and what its impact on your business. States that hold reciprocal agreements help employees work in neighboring states—not paying any extra income tax withholdings. Employee will only make the income tax payment to the state with the higher rate. But prior to that, ensure you thoroughly read the specific agreements that affect your company. If anything is not clear, contact your state agency to know what rules and regulations are applicable to your state. The second thing, you should track your employees’ live-in states by sending out biannual notes to keep HR team posted.
When employees move and you are not aware of the employee addresses can make for errors in payroll taxes. This can happen when the employee doesn’t communicate to you or you don't change that information immediately. So, it is recommended to send a biannual note to employees to let HR know their latest addresses. Get this as a reminder to maintain all your data updated and clean.
Keep an eye on all your in-state offices and which employees live in their place of work. Employees who work-from-home experience more benefits than on-demand employees—they make a productive work environment. As an HR head, you should know their working hours. As an employer, you may not have a work place in a particular state, but if the employee works more time out of their home, then you should identify where you should be paying the unemployment, and where you should be paying the state withholding.
Inform your employees to look at their paystubs. Direct deposit can help you save a lot of money. Generally, employees want a reminder to have a look at their paystubs to ensure everything looks fine. Ensure that you closely work with a tax professional to get informed all the compliance issues. This makes easier for payroll.