Under the influence of the ever-rotating wheel of globalization, it’s all-too-common for organizations to operate in multiple locations. Then those operations can be in different cities across a single state or various states across the country. However, with each growing footstep comes much more complex obligations and responsibilities. And by far the stringent one is the multi-state tax compliance.
The real problem with multi-state payroll compliance emerges from the fact that the rules you follow for your home state may not be the same as the other states where you do business. Every state has different payroll standards and tax structures. The very fear of non-compliance mainly sneaks through this immense diversity. Just to put this fear in a concrete form, glance through following concerns of multi-state payroll that include:
- Minimum wage
- Income tax withholding
- Leaves of absence regulations
- Common ownership concerns
- Workers Comp regulations
Let’s zero in on minimum wages as an example to demonstrate how steep the challenge of multi-state compliances can become. Assume that you are headquartered in Ohio that hires employees at minimum wage. But if you are operating in California, you have to pay California’s minimum wage of $10.50 an hour instead of Ohio’s $8.15 as of 2017. Here, your base in Ohio doesn’t mean much.
The spiral becomes even more labyrinthine when you get to know that twenty states have increased their minimum wage rates at the beginning of 2017. Moreover, there are some cities and regions that follow different minimum wages than their state’s standard. For example, Cupertino, Calif. follows a $12 minimum wage as of Jan 1, 2017. And on the top of it all, there are overtime pay rates. As per the Department of Labor, Minnesota’s basic minimum rate changes depending on whether your enterprise has annual receipts of more than or less than $500,000. Note that these differences may vary from state to state.
That’s precisely why it falls into the realm of wisdom to seek the assistance of payroll software. A well-oiled payroll system maintains an inherent compliance with IRS through its comprehensive tax management features. On behalf of businesses, it can handle all tax and compliance computations, including withholding requirements, multi-state taxing rules and reciprocity, and more. Similarly, it will ensure automatic updates on all U.S. federal, state, and local tax regulations. What makes it further desirable is its ability to leverage the latest geographic information systems to automatically determine the correct tax codes for employees. Basically, it oversees the following functions:
- Deposits federal, state, and local tax liabilities for more than 13,000 tax codes via electronic funds transfer or check
- Files all monthly, quarterly, and annual tax returns via paper, e-file, or magnetic media
- Balances quarter-to-date and year-to-date deposits to liabilities to ensure payments are accurate
- Researches and responds to agency inquiries
- Provides tax returns reports prior to due date for your review
- Delivers reconciliation summaries and copies of all filed returns
- Generates and files all amended returns
- Delivers multi-worksite reporting to the appropriate state(s) to assist you in reporting employees that work in multiple locations under one unemployment
Eventually, it results in a quick and accurate processing of tax information, simplified administration; and much-needed risk minimization. Moreover, with the deft touch of technology, few payroll systems have been able to print, seal, and send you your year-end tax forms – making them ready for immediate distribution. Clearly, by efficiently managing a number of human resources and payroll factors on a day-to-day or pay period basis, a well-deployed payroll system can become a human capital management system. The only pre-requisite for it is the selection of a right payroll system!