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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29580
Experience:  Taxes, Immigration, Labor Relations
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We are starting a drilling company based in Michigan.

Customer Question

We are starting a drilling company based in Michigan. However, our first contract is in Kansas State who do not have reciprocal agreement with any state in US.
Most of our employees live in Michigan ie are residents in Michigan
I am trying to set up payroll.
Please advise what state taxes our employees will pay on their biweekly paycheck and what taxes I as an employer are required to pay and to whom?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

State withholding requirements are based on the place of employment.

Thus - if actual work will be performed in Kansas - compensation will be classified as from Kansas sources and will be taxable for that state - and subject to withholding.

As residents of Michigan - your employees will be subject to Michigan income tax regardless of the source of income. However because the same income is already taxed in Kansas - they would be able to claim a credit for taxes paid to other state on their Michigan resident income tax returns - thus effectively will avoid double taxation of the same income.

Depending on personal circumstances - some might have additional Michigan income tax liability at the tax time - but that liability will likely be very minimal.

Expert:  Lev replied 1 year ago.

However - filing Michigan tax returns and paying additional personal income taxes (if any) - that would be responsibility of each employee.

as long as none of work is done in Michigan - and wages are paid for services provided in Kansas only - your responsibility as an employer is to withhold Kansas state income tax only.

When you will have employees working in different states - you would need to track separately wages paid for working in each state - according to each state law and regulations.

Customer: replied 1 year ago.
Thank you ... Assuming that also applies to Sui... Follow rules and rate for each individual state they are working in?
Expert:  Lev replied 1 year ago.

SUI taxes are paid ONLY to one state. That must be teh state where an employee works most of the time - that determines the primary place of employment.
But if your employees are working in Kansas only - then - yes - SUI are paid to that state.

Expert:  Lev replied 1 year ago.

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