Advising your clients on registering to pay an employee in a new state

36433_SageAccSolutions_graphic04_403As your firm expands and you bring on more and more clients whose businesses continue to grow, it’s important to make sure that they comply with local and state regulations that affect them as employers.

If you have a client that plans to launch operations in a new state, chances are that your client will be required to register as an employer. Depending on state laws and the amount of business your client conducts in the new state, your client may be required to withhold state taxes from payroll checks and contribute to the state’s unemployment and/or disability insurance fund. This is where providing the right guidance and advice to your clients becomes so critical.

The laws vary from state to state, but chances are that you’ll need to let your clients know that they’ll most likely be required to report hiring, rehiring and return-to-work activities within a set timeframe designated by the state in which they’re operating. Depending on individual state law, employers may be required to garnish wages for child support or other purposes.

The first step to registering a company to pay employees in a new state is to find a good source of information on individual state requirements. Sites such as www.payroll-taxes.com provide a repository of information you can use to find out what the requirements are for the new state in which your client will be paying employees. Requirements can include:

  • State tax information: Most states require employers to withhold state taxes from employee paychecks. Only the following states do not have a state tax: Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming.
  • Withholding requirements: As an employer, your clients will generally be required to register with the state either online or via a form and set aside a percentage of wages for state taxes. The site above provides information on obtaining forms and state withholding requirements.
  • Local taxes: Some states require employers to withhold local taxes in addition to state taxes collected via payroll. You can check for local tax information on the site to see if your client is required to withhold taxes for a municipality.
  • Disability insurance: Various states require contributions to a disability insurance fund. The site provides information on disability insurance requirements on a state-by-state basis.
  • State labor laws: State minimum wage requirements can vary from the federal minimum wage. For example, it can be higher but not lower. There are differing rules from state to state on termination pay, with some requiring the employer to issue final paychecks within a certain timeframe.
  • New hire reporting: As part of the registration process, it pays to learn about new hire reporting requirements. Many states have regulations requiring employers to report new hires, those returning to work or being rehired, within a set time limit.
  • Child support withholding remittance: Many states require employers to garnish wages to collect child support. If this applies to a new hire for one of your clients, they’ll need to know where to send the garnished wages.
  • Reciprocal states: Some states have reciprocity agreements covering employees who live in one state and work in another. The purpose is to relieve the employee of the burden of having to file two separate state tax returns. You can check for reciprocal state agreements online.

Once you obtain the information you need to register, you can advise your clients on how to begin the process and prepare them so they can pay an employee in a new state according to the requirements of that location. If you use a payroll service, such as Sage Payroll Services Powered by PayChoice, your representative can help you navigate registration requirements by providing forms and information on how to proceed.

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