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Tax Implications When Hiring Out-of-State

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tax laws, remote employee, out of state employee, tax implicationsYou’ve just found your perfect candidate to fill the new role in your IT department. He accepted the offer and you breathe a sigh of relief – your small business is growing! There’s only one problem. He lives in the outskirts of New Jersey and your business is located in New York.

Hiring out-of-state workers presents some complications when it comes to payroll taxes. But with the proper education, you can save yourself the hassle of dealing with compliance issues.

Initial considerations:

First things first. Check with state laws. Regulations could overlap between the two locations, but it’s best to ensure you’re well-informed with the legislation of each state.

Determine whether your potential new hire will be traveling to work in your office or if they’ll be working remotely. This will lay the groundwork for all tax considerations including things like unemployment, and state income tax.

Is this a permanent position or just a temporary stay? If you’re a construction company having an employee perform a longer job in another state, be mindful that some states can be strict with that constitutes a temporary work project.

Don’t forget about workers’ compensation insurance as this is often overlooked. Most states require you to have some form of workers’ comp, no matter your industry. You can likely add the employee to your existing policy, but double check with the employee’s state-specific laws.

Payroll tax implications:

Income tax withholding

As an employer, you are expected to withhold state income tax from the employee’s wages when subject to an out-of-state income tax.

Employment taxes

Other payroll taxes such as local taxes and unemployment may get tricky when you have employees in different states.

The best way to ensure compliance and ease the headaches? Hire a trusted payroll provider.

At PrimePay, when you run payroll with us, your taxes are also filed. Click here to learn more.

 

 

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