We are transitioning a subsidiary acquired that will change withholding state payroll taxes approach for employees based on resident (home) state vs work (project) state. We recognize the multi-state laws are complicated, for both employee and employer taxes and there is not one exact system that achieves 100% employee and employer tax scenarios, looking for best and aligned approach. What approach do you use?
· Withhold employee payroll taxes based on resident address, not just work location?
· Any forms or information provided at onboarding to construction employees to inform them of the payroll tax withholding approach?
Change:
New system will withhold employee state payroll taxes based on the employee's resident state on file. For those employees that reside in a state different than project (work) state, the state income tax withheld will be based on employee resident state and current W-4 Form on file.
This is a change from our current system, which withholds taxes based on project (work location) only.
Example: For employees working in Texas (no state income state) but residing in a different state, these employees will begin to see state income tax withheld based on respective resident state on file, which could impact their net earnings on each paycheck.
Overall, the assigned work location by HR, review of the home resident address, and W-4 details by the employee will ensure accurate payroll wage reporting and tax withholdings on the year end W-2.
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Crystal Spoor CPA
Chief Financial Officer
Ref-Chem
Houston TX
(913) 660-2580
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