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Taxes make up just one part of the enormously complex equation of working and hiring internationally. Workers must tackle issues like visas, culture shock, and language barriers. Businesses, meanwhile, must contend with issues of payroll, benefits, and compliance. That means if your organization is based in New York, but you have an employee working from home in Utah, you have to withhold New York taxes. Develop a policy and approach on when to recognize state changes, when to re-code employees for tax purposes, Wage & Hour, Workers’ Compensation and other applicable requirements. Establish an assessment and approval process, involving the Tax Department, Legal, HR etc.
Again, review your employer’s policy to confirm your options and check with HR to answer any unresolved questions. All signs point to remote working not only continuing post-pandemic but to increase further. There are many options out there for handling your payroll, but in our opinion, these are two of the best solutions at the moment. Wise, in particular, also integrates well with many payroll and accounting systems which is a real bonus.
State Unemployment Tax (SUTA)
This test requires that you withhold and pay taxes to the state where your organization is located even if your employees live out of state, if they do so out of convenience. Unless you specifically require your out-of-state workers to be remote in their state, you have to withhold taxes for your state. As another example, Utah adopted SB 39 on March 2, 2022 to adopt specific rules for tax withholding on employees temporarily in the state. Before you panic about your tax bill, though, remember that every tax situation is different. Chances are good you won’t actually be double-taxed—aka, taxed for the same income in two different states, paying twice as much in taxes as you normally would.
Keep in mind that whether your employees report in person each day or are completely remote, as the employer, you will still be required to withhold and remit federal income tax and FICA on their behalf as well. For more information on federal taxes and how to compute them, check out our 2022 Federal & State remote work taxes Payroll Tax Rate Guide. Some states require your company to withhold income taxes even if the employee only works for one day in that state. For example, as ADP points out, Maine requires withholding after 23 days in the state and earnings of more than $3,000; Utah, in 2022, adopted a threshold of 20 days.
Payment and Filing Options
This occurs naturally whenever you report a move to the IRS, and will result in you getting taxed for different portions of the calendar year based on where you lived. For example, if you lived in New York from January to March but then moved to California, you’d pay New York state taxes for those three months, and California taxes for the rest of that year. Although larger companies tend to have established tax relationships with states other than their home state, this might not be the case for smaller businesses. If you moved out of state or spent a significant amount of time working elsewhere this year, be sure to talk to your employer so you can both avoid any unexpected tax penalties. Following current tax laws just got more complicated with the influx of remote work.
Where do I pay state taxes if I live in a different state than my employer?
As a remote worker, you’re required to pay tax on all your income to the state you live in (if your state has personal income tax). This is true no matter where your employer is located.
