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Remote workers have become a staple of the workplace, but hiring out-of-state employees can lead to payrolltax complications. Multi-state payrolltax withholding done incorrectly can lead to penalties and interest for employers and create tax headaches for employees.
Inevitably, your clients with growing businesses will want to hire, so you’ll be better able to help them if you have a clear understanding of the differences between SUI (state unemployment insurance) and SIT (state incometax) and how they affect your clients’ businesses. Some states require employers to pay additional payrolltaxes.
Payrolltaxes can be daunting for employers to calculate and pay. With the numerous tax laws, regulations and compliance requirements, employers are required to be up-to-date on the latest regulations to ensure they’re making accurate and timely payrolltax payments. It is not intended to provide any tax advice.
This changing employment landscape requires employers to reassess their payrolltax withholding processes to ensure you are withholding the proper amount of state, local and unemployment taxes from your employees’ wages. Below we dive into the state and unemployment tax responsibilities employers need to know.
If the IRS believes salaries are below the typical wage for those positions because the business is trying to avoid paying payrolltaxes, the company will lose its S Corp status. Some states, such as New York, require corporations to elect S Corp at the state and federal levels.
Some key factors to evaluate include: Tax rates Tax rates vary widely across states. Some states have higher corporate incometax rates, while others offer lower rates or no tax at all. Property tax rates can vary significantly, impacting the cost of owning or leasing business space.
Federal Employment Taxes. The United States first imposed a federal incometax briefly during the American Civil War and also in the 1890s. Constitution in 1913 that permanently legalized a federal incometax. And in 2013, the Additional Medicare tax (0.9%) on wages in excess of $200,000 took effect.
Three COVID-19 relief bills enacted in 2020 had wide-ranging tax implications for companies, Oaks noted—the CARES Act, the Families First Coronavirus Response Act, and the Paycheck Protection Program Flexibility Act. The economic downturn is hitting state revenues, however, so tax cuts may be difficult to implement.
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