Monday, October 7, 2013
If an employee lives in one state and works in another state, which state should the company remit the state unemployment taxes to?
Technology and the work environment have changed drastically. Employees are now more mobile and decentralized than any time in the past. For companies that have employees who travel or who work from home offices there is often the question of where the state unemployment should be remitted. Should it be sent to the employee?s place of residence? Should it be remitted to the state of work? Or should it be submitted to the state where the company is located?
Here are the steps to determine the proper state to report SUTA to:
- Local Services – The state where the work is preformed is the state that would receive the state unemployment funds. If the worker provides services outside the state that are incidental in nature they would not impact the filing of the state unemployment.
- Base of Operations ? If the workers services are not localized in one state then the base of operations would be the state to remit the state unemployment.
- Place of direction or control ? If there is no base of operations then the state where the employee receives direction or control would be the proper state for filing the state unemployment.
- State of residence ? If the previous three do not provide an answer then the company should file the state unemployment in the state the employee resides.
The employer would need to register and obtain the appropriate numbers to remit in the all the applicable states. As the employer it will be critical to know the taxable wage base for each the state the unemployment will be reported. As an example Tennessee requires state unemployment on the first $9,000 while New Jersey?s taxable wage base is $30,900.
One last issue is the reduction in credit against the federal unemployment taxes that some states are experiencing. Currently 18 states are paying a higher FUTA rate ranging from .09% to 1.5%. The states with the higher rates are identified on the 940 Schedule A.
If you have any questions regarding the filing of state unemployment taxes or any payroll related issue contact
gary@IlluminareGroupInc.com or call 615-542-1919.
Gary Garner
IRS CIRCULAR 230 ? DISCLOSURE NOTICE: IRS Circular 230 regulates written communications about federal tax matters between tax advisors and their clients. To the extent the preceding correspondence and/or any attachment is a written tax advice communication, it is not a full ?covered opinion?. Accordingly, this advice is not intended and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS regarding the transaction or matters discussed herein.