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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22645
Experience:  Taxes, Immigration, Labor Relations
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hello, you helped me with a multistate tax question in the

Resolved Question:

hello, you helped me with a multistate tax question in the past and I have a follow up question. If an employee lives in one state (CA) and works in another (FL) for a short project, would withholding be done for CA and not for FL (since FL does not have state income tax)? Further, would employer still have to pay unemployment tax through Florida because that is where the work is being performed or would that be paid to California as well?
Submitted: 9 months ago.
Category: Tax
Expert:  Lev replied 9 months ago.

Lev :

Hi and welcome to our site!
Generally - the tax liability is based on both - workplace location AND residency.
Because Florida has no income tax - th etax liability is not an issue - but an employee will be liable for CA income taxes based on his residency.

Customer:

Would you know at all what the situation would be if the employee worked in Louisiana?

Lev :

Another issue is employer's responsibility to withhold CA taxes - that is based on if the employer has any presence in CA - if yes - then withholding is required. If the employer has no nexus in California - no withholding is required.

Customer:

We have 1 or 2 employees who work in California but no office, would this be a "nexus" for purposes of California withholding?

Lev :

If an employer doesn't withhold income tax from wages - that would be responsibility of the employee to pay estimate taxes.
Unemployment compensation will be solely based on the place of employment. If employees are working in several states - the primary place should be considered for unemployment taxes.

Customer:

So there is chance that unemployment taxes would be paid to Louisiana (or Florida depending on where the employee works) but their withholding is for California (they live in California and only worked in Louisiana for 1 or 2 days)

Lev :

We have 1 or 2 employees who work in California but no office, would this be a "nexus" for purposes of California withholding?
Yes - having employees working within the state means the business has a nexus within the state.

Lev :

So there is chance that unemployment taxes would be paid to Louisiana (or Florida depending on where the employee works) but their withholding is for California (they live in California and only worked in Louisiana for 1 or 2 days)
If employees primary work in California - and are only working in other states for short periods - unemployment taxes must be paid in California.

Customer:

the employee is temporary and only works for that short period in Louisiana, they are in the entertainment industry and live in Cali but travel to Louisiana for a shoot where all the work is done

Customer:

so works for about 2 days in Louisiana then employment ends

Customer:

so would they pay unemployment taxes in LA because that was the place of work?

Lev :

so would they pay unemployment taxes in LA because that was the place of work?
Unemployment taxes are due to the state where there main workplace is located. Only to one state. If employees primary work in California - and are only working in other states for short periods - unemployment taxes must be paid in California.

Customer:

Ok, thank you so much for your help. One last question, I am not sure if you would be able to answer but I am having trouble finding out who would be exempt from income tax in Louisiana, is there some kind of threshold as to if employees make under a certain amount or if work less than a certain amount of days?

Lev :

There is no exemptions from income tax based on the amount OR the length of a working period.
Nonresident who are required to file a federal individual income tax return are required to file a Louisiana income tax return, IT-540B reporting all income earned from Louisiana sources.
The calculation for the IT-540B requires that a taxpayer report all income from all sources in order to determine a ratio of Louisiana adjusted gross income to Federal adjusted gross income. Only income earned from Louisiana sources, however, is taxed.

Lev :

Nonresident taxpayers use the Tax Computation Worksheet to calculate the amount of Louisiana tax due based on the amount of their Louisiana taxable income. The Tax Computation Worksheet allows a deduction for a Personal Exemption based on filing status. A credit of $1,000 for each dependent and for each taxpayer and/or spouse whose age is 65 and over, or who is blind, is applied in determining the amount of tax.

Customer:

so as the employer, we must apply withholding tax each employee who works in lousiana (even for a few days) because there is no exemption that would apply to them?

Lev :

That is correct - if you are en employer and have employees working within the state - withholding is required based on withholding tables.
I have several clients who are construction workers - and every year they receive 10-15 W2 forms for working in different states - some are for a few days only.
Some states have have reciprocal agreements regarding income tax liability of nonresidents. However California has no such agreements with other neighboring states.

Lev :

For the list of states with reciprocal agreements - see here - http://taxes.about.com/od/statetaxes/a/reciprocal-agreements.htm

Customer:

that was going to be my next question lol, so in the end employees will file tax returns for each state where work was performed?

Lev :

Generally - yes - and I agree - that would be an additional burden on taxpayers.
However - filing requirements are different for each state. In Louisiana - filing requirements are same as for federal income tax return.
In additional - Louisiana taxes would be credited in California tax return (as for residents) - so to determine that tax liability - Louisiana nonresident tax return would be needed.

Customer:

ok got, so just wrapping up and confirming. For an employee who lives in CA but works for us temporarily on a short term project in LA, we will have to do state withholdings for both California and Louisiana and they will be credited once they file their tax returns? Also unemployment tax will be withheld in LA where the work was performed?

Lev :

You as an employer - do withholding only for ONE state where the work site is located- you may withheld for both states per employee's request.
Unemployment tax is not withheld from wages - but are paid by an employer - if LA is the only state where the employee worked - unemployment tax is paid to LA. Otherwise - unemployment taxes are paid to the state where the employee works most of his/her time.

Customer:

Sorry Lev got pulled away, thank you for your help!

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22645
Experience: Taxes, Immigration, Labor Relations
Lev and 4 other Tax Specialists are ready to help you
Customer: replied 8 months ago.

Hello Lev, I was wondering if i could follow up with you about the conversation we had about state withholding for non-residents. You said that as the employer we do withhold for ONE state where the work is performed. Do we, as the employer, have to withhold for the state where they are residents if they are not residents of the state where the work is being performed?

Expert:  Lev replied 8 months ago.
As a general rule - the place on employment dictates the tax liability.
If the business has an employee in a specific state - that means - the business has a nexus in that state and and is required to withhold state income taxes from wages paid to the employee for services performed within that state.
Again - as a general rule - employees are NOT required to withhold income tax based on residency of the employee - but ONLY based on the place of employment.

However - there are some exemptions from that general rule.
Some states have have reciprocal agreements regarding income tax liability of nonresidents. Such reciprocal agreements dictates that income tax liability is based on residency - and not based on the place of employment.
For instance - according to the reciprocal agreement between Illinois and Kentucky - residents of Illinois working in Kentucky pay income taxes to Illinois only.
In this case per request of the employee - the employer would withhold Illinois taxes based on residency.

If there is NO reciprocal agreement between states of employment and residency - the employer is required to withhold state income taxes based on the place of employment - but may - not required! - withhold additional income taxes based on residency if the employee requests so.
Customer: replied 8 months ago.

Thank you, XXXXX XXXXX employees as residents of California would be taxed only in Louisiana for the work performed there? Is there ever an instance where an employee would be taxed in both states? I seem to be coming across information where this could be a possibility but am confused by it.

Expert:  Lev replied 8 months ago.
These are two separate issues - withholding requirements for employers and tax liability for employees.

Employees who are residents of California would be taxed on ALL their income regardless where services are performed.
In this case compensation will be taxable for both states - to Louisiana based on the place of employment AND for California based on the residency.
Thus when the employee will file his/her personal income tax return - there will be TWO state tax returns:
-- Louisiana nonresident tax return, and
-- California resident tax return.

On the Louisiana nonresident tax return - only income from Louisiana sources will be taxable;
On the California resident tax return - ALL income will be taxable, but there will be a credit for taxes paid to Louisiana.
Customer: replied 8 months ago.

Thank you, XXXXX XXXXX you have any idea what the withholding requirement for employers in California would be?

Expert:  Lev replied 8 months ago.
California requires withholding agents (persons or entities who make payments) to withhold on residents and nonresidents of California when they receive California source income payments.
Specific withholding guidelines are provided in the FTB publication 1017 - https://www.ftb.ca.gov/forms/2012/12_1017.pdf
Specifically - see page 7 - What types of payments are subject to
withholding?

Please be aware that requirements to withhold taxes for employers and tax liability of employees - are two separate issues.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22645
Experience: Taxes, Immigration, Labor Relations
Lev and 4 other Tax Specialists are ready to help you

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