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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10861
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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We are ring a remote employee that will do nationwide sales

Customer Question

We are hiring a remote employee that will do nationwide sales for our company, but I wanted to ensure that we followed all compliance issues for setting up his payroll taxes.
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: We manufacture specialized mid-duty delivery trucks (like FedEx or UPS). This employee will be a sales person working remotely out of WA, but we are Headquartered in Ohio.
JA: Is there anything else important you think the Accountant should know?
Customer: He would not be working directly in WA or any other state, it would be a outside sales position, on the road typically as well as working remotely.
JA: OK. Got it. I'm sending you to a secure page on JustAnswer so you can place the $5 fully-refundable deposit now. While you're filling out that form, I'll tell the Accountant about your situation and then connect you two.
Submitted: 8 months ago.
Category: Tax
Expert:  Lane replied 8 months ago.

Hi,

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You've asked a very big (maybe broad is a better word) question here; States have various standards for requiring workers to file personal income tax returns when they work for periods of time in a state where they don't live. The rules that dictate how employers withhold income tax for those employees. are also as varied as the number of states (THis is a state law issue, adn requires that you understand the state tax code and withholding rules for each state.

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Some states, like New York, carefully monitor out-of-state workers (non-residents that come into their state to work); other states are less vigilant about it.

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From the employee's perspective, the starting point is to withhold for the state of of which he is a resident. All states requires their residents to pay income tax to the state on ALL WORLDWIDE INCOME, regardless of where that pay is earned.

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The states will vary, again, but over certain amounts, (standeductions and/or exemptions) and past a period of time in others, those states will require a NON-resident return be prepared by the individual so that they can tax the "source income" earned in that state.

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It's outside the scope of this venue (at least at this price) but wjhat needs to happen is your payroll dept needs to understand the state law and withholding requiremenmts for EACH state. (This is the reason many companies doing this use payroll companies - such as ADP or Paychex - who are intimately familiar with the law of EVERY state).

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It's also the reason that over 150 large public corporations are in support of the Mobile Workforce State Income Tax Simplification Act: http://www.cost.org/WorkArea/DownloadAsset.aspx?id=82788

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But the states have been reluctant to sign on in their support and will be so, to adopt, becaus their iterest is in collecting the most revenue they can.

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One option that many, especially smaller companies, have used - is simply to pay the individual as an independent contractor (1099-MISC) and add in enough income to allow the individual to purchase their own insurance and contribution to their own Simplpified Employee Pension or Solo-401(k).

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Please let me know what questions you have from here.

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lane

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I have a law degree, (Juris Doctorate), with concentration in Tax Law, Estate law & Corporate law, an MBA, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986