Resources, Rules Pose Challenge to Multistate Taxation Compliance


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Determining how to track employees across state lines and keeping up to date on taxation requirements that differ by state, strain employer resources and make perfect multistate taxation compliance challenging, a representative from Ernst & Young LLP, said during a recent webinar.

Determining how to track employees across state lines and keeping up to date on taxation requirements that differ by state, strain employer resources and make perfect multistate taxation compliance challenging, a representative from Ernst & Young LLP, said during a recent webinar.

Employers may become liable for taxes and withholding in multiple states if employees travel and perform work in multiple jurisdictions. The threshold at which tax and withholding liabilities are triggered differs from state to state, which complicates staying compliant for employers and employees.

Compliance requires time and resources an employer may not always be able to spare, so businesses end up on a compliance spectrum, Candylin Mendoza said, referring to the results from the 2016 Multistate Payroll Compliance Survey by Bloomberg BNA and Ernst & Young LLP.

“Most employers fall somewhere in between or in the middle, such that they adopt a level of compliance that aligns with their business landscape, their risk appetite, and their resources to implement such a program,” Mendoza said.

Assessing the amount of risk an employer is subject to and comfortable with is an important step in creating multistate compliance plan, Mendoza said. Things to consider include how often to make adjustments and payments, and how to track employee travel, she said.

Tracking employee travel is particularly challenging, as most employers do not have an accurate way to identify and track where an employee travels and performs work, Mendoza said. Employers may rely on travel suppliers, expense reimbursements

Determining which state requirements apply when workers travel and work in multiple jurisdictions poses another difficulty for employers trying to comply, Mendoza said. Researching and tracking changes to state and local requirements, which differ from jurisdiction to jurisdiction, becomes a question of employer resources, she said.

Panelists from Bloomberg BNA and Ernst & Young LLP hosted a webinar in June to discuss the results of the 2016 Multistate Payroll Tax Compliance Survey, as the 2017 survey opened for responses.

Responses Requested for the 2017 Survey

Data from the 2016 Multistate Payroll Tax Compliance Survey provided a window into what multistate tax compliance looks like from an employer’s perspective.

Employers’ answers can reveal how compliant industries are or how employer size correlates with audits. Last year, employers’ responses pointed to states where state and local income tax and unemployment insurance were most common.

Information like this shows employers how they measure up against peers and what to expect from the jurisdictions where they operate.

Employers should respond to the 2017 survey to access to this year’s results and the Bloomberg BNA and Ernst & Young.

Take a free trial of Bloomberg BNA’s Payroll Decision Support Network, your one-stop resource for reliable, up-to-date guidance and analysis in every area of payroll administration and compliance.

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