Employing “road warriors” who live in one state and work in another can result in complicated tax obligations. Fortunately, you don’t have to handle them yourself. Partner with Innovative Employee Solutions as your international employer of record, and leave the complex tax issues to us.
Variations in Income Tax Requirements
Because states have different requirements for income tax returns filed by residents who work in a different state, your company’s tax withholdings are affected if you hire workers who live outside your state. For example, New York and California, among other states, vigilantly monitor tax returns for residents who work out of state to ensure proper income tax amounts are being collected. Some states expect to collect income tax if an employee works even one day in that state. Other states expect to collect income tax after 10 to 60 days of working in that state. In addition, some states assess income tax based on an income-earned basis, starting from $300 to $1,800 per year.
Reciprocal Agreements
Some bordering states, such as Maryland and Virginia, have reciprocal agreements designed to ease the complexity of collecting income tax. For example, a Virginia resident working in Maryland need not pay Maryland income tax. Also, the District of Columbia has reciprocity with all states, meaning employees pay income tax only in their resident state. In addition, many states enforce the Multistate Tax Commission, meaning an employee working in the state for 20 days or less need not pay income tax in that state. However, this applies only to workers from states that don’t collect income tax, or states such as North Dakota that enforce the legislation.
Mobile Workforce State Income Tax Simplification Act
The Mobile Workforce State Income Tax Simplification Act, currently being introduced to the Senate, would standardize 30 days as the amount of time required to work in a state and be liable for income tax in that state. After 30 days of working in a state, the employee’s earnings would be taxable in the state in which they’re earned and possibly credited against the employee’s income tax collection in their resident state.
IES as International Employer of Record
Avoid the headaches of keeping current with income tax laws, collections, filing and payments by partnering with IES as your international employer of record. We’ll help you place your temporary, temp-to-perm or contract workers in assignments all over the globe without the hassles of setting up your business in those locations. As a preferred payrolling company, we’ll ensure your placements are paid according to local and federal employment regulations and tax laws. You’ll avoid risking fees and penalties for being noncompliant.
Partner with a leading outsourcing company so you can expand your business throughout the country or the world. Get in touch with the experts at Innovative Employee Solutions today!
