1. APA North Jersey Chapter Ana C. Rombola, CPP Jacqueline Springs, CPP April 30, 2016 How to Comply with Multistate Payroll Tax Withholding

2.  State Income Tax Withholding  Multijurisdictional Overview Resident vs Nonresident State W-4 Forms Non-withholding States Factor test for SUI  How to get your employers to comply  Risk of Non-Compliance  What’s included in Compensation  Defining Allocation of Wage Percentages Agenda Topics

3. Rules in determining state income tax withholding:  The place where the work is performed  Employee’s primary resident state  Is there a reciprocal state agreement  Does the state require to withhold income tax (AK, FL, NV, NH, SD, TX, WA, WY, and TN do not require income tax withholding) States define a resident as a person being domicile in the state or spending more than a specified amount of days in that state “Domicile” is the place where an individual has a true, fixed, permanent home, and principal establishment If the employee is a nonresident and works in multiple states with no reciprocity, the employer would be required to withhold multiple state income tax In some jurisdictions, the employer could have local tax responsibility State Income Tax Withholding Overview

4. States Non-Residents Rules Non withholding states

5. States are holding employers accountable for knowing where their employees are working and the payroll withholding tax that applies  The ability of multistate employers to proactively manage the overall compliance issues associated with employees who travel/work outside of their primary work location is vital to meeting regulatory demands  There are a wide variety of complex rules governing state withholding  According to recent industry survey’s, many employers have been unable to effectively comply on a state-by-state basis  Employees must estimate the percentage of their time spent in working in the nonresident state so the employer can allocate the appropriate state withholding tax Multistate Nonresident Tax Withholding Allocation

6. Risk Employees who do not comply by estimating their percentage of time spent outside of the primary work state, expose the employer to noncompliance Risk of noncompliance:  Employers who fail to inform their employees of the multistate nonresident regulation are liable for employee back tax withholding; penalties, and interest Risk of noncompliance during tax audit:  Work and resident location data by pay period  All applicable employee data, both current and historical  Proof of timely tax payments and filings  Copies of returns (federal, state, local)  Copies of Forms W-2  Taxing jurisdiction reports Audit exposure - Auditors generally review:  W-2s  Taxing jurisdiction reports  Expense reports showing reimbursement (tolls, parking, meal, lodging, etc.)  Time tracking system reporting

7. Multistate Withholding Allocation Qualifiers As a general rule, employers with offices in multiple states are required to withhold state income tax for employees who are not a resident of that state and whose work location is outside of their work state Applicable allocation criteria:  Spends at least a portion of their time working outside of their work location state annually  Attend meetings (even if it is simply for a portion of the day) Criteria not applicable:  job-related training such as in-house training courses, professional development workshops, or seminars If you’re working in a different state then you live in, you’re required to:  file a nonresident state return to the state you work in  file a resident state return to the state you live in  file a federal tax return In a Nutshell, if you are not working and living in the same state, you’ll need to file two state tax returns; a non-resident return and a resident return

8. Understanding a states’ authority for requiring employer withholding is imperative for complying with state withholding laws Over the last decade, multistate employers have witnessed notable increases in states' nonresident withholding enforcement efforts beyond the typically thorough audits by California or New York. During that same time, multistate employers have seen internal auditors question their policies and procedures related to state nonresident withholding compliance While much of the discussions surround withholding state income taxes from the salaried or commissioned wages of multistate business travelers, and deservedly so, employers are also faced with state withholding compliance for various lump-sum payments, deferred compensation, or some combination thereof, made to those travelers. Though lump-sum and/or deferred compensation payments may be paid to all levels of employees within a company, these payments historically have been "low-hanging fruit" for state auditors because they typically represent substantial wages paid to high-ranking executives. As a result, unusual payments create nonresident withholding audit risk for many employers Withholding allocation is subject to all gross compensation (Base, Bonus, Equity, Severance, and other Supplemental Wages) State Withholding Considerations for Special Payments

9. State Income Threshold’s at a Glance StateVisits and Income Threshold Arizona60 days in a calendar year CaliforniaIn-state wages are equal to or below the "low income exemption table" Connecticut14 days in a calendar year Georgia23 days in a calendar year or 5% of total earned income Hawaii60 days in a calendar year Idaho$1,000 in a calendar year Maine10 days in a calendar year New JerseyIn-state wages are less than the employee's personal exemption in a calendar year New Mexico15 days in a calendar year New York14 days in a calendar year Oklahoma$300 in calendar quarter OregonIn-state wages less than the employee's standard deduction South CarolinaEarns in-state wages less than $800 in a calendar year UtahEmployer does business in the state for 60 or fewer days in a calendar year VirginiaIn-state wages below employee's personal exemption and standard deduction West VirginiaIn-state wages below employee's personal exemptions amount Wisconsin$1,500 in a calendar year

10. Withholding Allocation Calculations #1

11. Withholding Allocation Calculations #2

12. Questions