Hi,
Most business owners think an employee moving to another state is just a payroll address change. The truth is far harsher: one remote employee can create an entirely new set of tax, payroll, and registration obligations for the company.
If any of these happened, your business may already have a multi-state compliance issue:
- An employee moved to another state and continued working remotely
- You hired someone who has never worked in the company’s home state
- A founder or executive relocated but remained on payroll
- An employee began working from a second home for part of the year
- A salesperson, consultant, or technician regularly works across state lines
- A contractor was reclassified as an employee in another state
- An employee moved without a notice or updated only their mailing address
It reaches far beyond payroll – state income-tax withholding, unemployment insurance, workers’ compensation, corporate income or franchise tax, local registrations, and sometimes sales-tax nexus can all be affected.
Here is how the exposure can build:
- Payroll withholding may be required where the employee physically works, even though the company is located somewhere else. Some states also apply special sourcing rules to remote employees.
- A $100,000 employee with a 5% state withholding obligation represents $5,000 that may need to be accounted for – before possible penalties and interest. The actual obligation depends on the states involved.
- The employee’s presence may require a new state business return or create minimum franchise taxes and annual filing fees, even when little or no income is assigned to that state.
- A physical presence may also affect sales-tax obligations, which can require registration, collection, and filings that are separate from income tax.
- Unemployment insurance generally follows where the work is performed, subject to state localization rules for employees working in multiple states.
The catch is that these obligations usually sit with different providers who never compare notes. Payroll sees an address change. The bookkeeper records the wages. The tax preparer discovers the new state after year-end. By then, registrations and filings may already be late.
That is why we put everything under one roof:
- Full-service multi-state payroll – withholding, unemployment accounts, payroll filings, and contractor 1099s handled correctly
- State-nexus review – identifying where employees, owners, property, and sales may have created filing obligations
- Business registrations and compliance – including income, franchise, payroll, and applicable local requirements
- Sales-tax analysis and filings – so physical and economic nexus are reviewed together
- Monthly and annual bookkeeping – with payroll, worker location, and state activity reflected in the same records used for the returns
- Quarterly tax estimates – updated when income becomes taxable in additional states
- Personal and business tax returns – federal and multi-state filings prepared by the same team managing the underlying data
The question is not simply where your company is registered. It is where your people are actually working – and whether every state connected to that work has been handled correctly.
Reply to this email by Wednesday, and we’ll schedule a free 15-minute call with our senior tax advisor. Bring your current employee list, the states where they work, and your latest payroll report so we can identify where your business may have exposure and discuss how to keep payroll, bookkeeping, sales tax, and tax returns under one roof.
Sincerely,
—
George Dimov, CPA
Licensed and Insured
(833) 829-1120 toll free
(212) 994-8081 Fax
www.dimovtax.com