Friday, October 26, 2018

Calculate two state withholding taxes on the employee's paycheck

Employers usually deduct state withholding income based on the employee's workplace. If an employee works in California (CA), employers need to withhold CA Withholding. Two state withholding will appear on the paycheck if the employer has workplaces setup for both the home address and workplace of the employee.

Here are generic rules for state withholding and the rationale:


We have an employer (ER) with an office in state X with employee (EE) assigned to this office who is living in state Y.


1. If the ER has an office in Y, NetSuite does a proper Y withholding with this EE. It also means that the ER is registered in Y as a business and has all state tax ID's to report and pay all the taxes.


Payroll user can opt to remove one of the withholdings by following the steps below:

a. Navigate to Lists > Employees > Employees

b. Click Edit next to the employee in question

c. Navigate to Payroll tab> Taxes subtab

d. Click Exempt box next to the state withholding

e. Click Save

f. Update Payroll Information by going to Setup > Payroll  > Update Payroll Information

Note: Please consider effects in Taxable and Taxed Wage Base Amounts.



2.  If there are no offices in Y at all, this is a courtesy withholding. If the ER wants to support it, an alternate solution is to set in the system a nexus (fictitious office/workplace) in Y. On the top of it, in order for Premier Payroll Service to deposit and report taxes, the ER should register with Y and get all tax ID's.


Notes: Generally, Y will want the ER to pay business license taxes. Some states provide registration for out of state ERs for free exactly for such cases. It is also possible to talk to the state and ask to waive the tax, but payroll users need to enter tax ID's in the system.  Nexus is a door to a courtesy withholding.

There are some states which allow employers not to register for a workplace (for employee working and leaving at home).  In this case ID is set up as Not Applicable and not Applied For at Setup > Payroll > Set Up Payroll > Jurisdictions Tab.  Please contact NetSuite Customer Support to manually deactivate the workplace from the Premier Payroll Service back end.



Disclaimer: This article is written with the undertaking that tax rules and laws are constantly changing and the topic is updated at the publish date. The topic is not intended or written to be used, and cannot be used for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any matters addressed herein.

This material does not constitute tax, legal, or accounting advice and neither NetSuite nor its agents, employees, or representatives are in the business of offering such advice. Please consult your tax, legal, and accounting advisors for tax, legal, or accounting advice.  


No comments:

Post a Comment