Remote employees are often required to pay taxes to the state in which work is performed. In most cases, employers are required to pay taxes on wages paid to these employees, even if the employer has no brick and mortar presence in that state.
When managing remote employee taxes, a good rule of thumb for employers is to always abide by the tax laws of the state in which the remote employee works. While there are often other factors to consider, here are some key things employers should keep in mind:
Some states require employers to register for accounts with the tax, labor and/or unemployment departments in the state the employee works.
Depending on the location, employers can be required to hold and remit both state and local income tax even if the state where the employer is located doesn’t have income taxes.
Employers must also purchase workers’ compensation in the state where the employee works.
Some states require employers to purchase disability insurance as well.
Managing taxes for remote employees is a complicated. One slight misstep could lead to big problems. That’s why so many organizations leave it to the payroll experts to manage taxes for remote workers. Paycor got its start in one of the most complex tax environments and is the trusted HR and payroll software provider for more than 30,000 organizations.