Multi-State Payroll...

We now have 3 employees working for us in Las Vegas. Do I have to withhold State taxes for the other state on these 3 employees and send in to Nevada just like I do for the employees who live here in Arizona?

I need to deduct withholding for two states during the same pay period for the same employee. This in not a one-time incident. The employee performs work in 2 different states on a regular basis. Support says QB will handle up to 3 states but wants an incident fee to tell me how to set this up. I have both states set up, I just don't know how to indicate to the payroll system which hours were worked in which states. I also don't want to repeatedly have to change the Withholding State and generate 2 paychecks each pay period (for the same person) -- which is what payroll support initially told me to do.

How do you set up to deduct for two states? In employee setup, the state tax tab, I can only choose one state. The employee lives in PA, but works in both PA and DE. The business is in PA.
Any suggestions on how to handle this in QB 2005 Pro?
Thanks!

State taxes are based on where you live and where the business you work for is located, not where you travel to for the business you work for. The physical address for the business is what you need to use and the physical address for the employee.
You should only need to withhold the PA state tax for the employee.

Thank you for your reply!

State taxes are based on the the physical address for the employee and the physical address of the business. It is NOT based on where they travel to perform the business activities.
If the physical address for the business is in a different state then where the employee lives, then you would select that state for the state worked and the state subject to withholding would be the state he lives in.
Some states have county taxes and in that case you would create a non-resident county tax and withhold that amount for the county he works in, in addition to the resident county tax for the county he lives in.
For employees:
You only have to pay state taxes into and for the state that you live in and only file your taxes for the state you live in, unless you have the non-resident county taxes.

>>> You only have to pay state taxes into and for the state that you live in and only file your taxes for the state you live in, unless you have the non-resident county taxes.

Actually, this is not true 100% of the time. I live very close to a state line and some folks who live in one state and work in the other pay taxes to both states.

I have no idea the whys or wherefores, I just know that's what they tell me.

I also have seen a situation where folks I work with have been detailed for long periods of time to another state (different than the first one I mentioned) and they've told me there are limits to how long they can work in the other state without owing to both.

Hope this is helpful - guess it never hurts to get specific advice based on one's specific situation just to be safe.

We are thinking of going back to QuickBooks - the reason we quit was it did not do multiple states. Our employees work in multiple states and have to have multiple state taxes deducted. Sometimes in 2 or 3 states in one week on one paycheck. I need to know that an employee can be set up to have multiple states income tax deducted from there paychecks and that they can be set up to have different ones later, since we change the states we are working in on a regular basis.

MC,

Unfortunately, you're quite incorrect. I am struggling right now - we are a CT company with CT residents as employees. We are considering an expansion into MA & RI, and for the short term intend to send those CT employees to deliver products & provide services. Most states classify this presence in the state as "conducting business" and therefore expect the CT business to withhold payroll taxes from those CT employees. And yes, the CT employees will have to file MA and/or RI income taxes.

It does not appear QuickBooks has a systemic way to address this issue. It is a REAL issue! QB Host, What's Intuit's plan on this???

Hi everyone,

I understand how confusing this must be. Unfortunately, Quickbooks does not currently allow multi-state with-holding taxes for employees with any of it's payroll options. Click here to see a Knowledge Base Article on the subject.

To my knowledge, there aren't any payroll services that offer this functionality.  One of the major difficulties in dealing with this issue is that W-2 forms do not have multi-state capability.  Therefore, you would have to create separate employees for each state you had to report taxes to (i.e. John Smith, John A. Smith, John Alan Smith, etc.)  However, if this method is used, federal taxes will be underwithheld due to limited wages per pay period which would cause state taxes to also be underwithheld.  Also, taxes that have floor and ceiling limitations such as unemployment and social security will not be met properly. 

The cleanest solution is to create a full paycheck for the employee (John Smith) for all hours worked in the period(40), record the amount of taxes withheld,  change the hours to the hours worked in this state (10) and manually change the federal withholding to reflect the correct percentage (in this scenario, 25%). Then do the same for the other names for the same employee. 

You will still have to keep track of floor and ceiling limitations manually, but it is the best I can offer.

I just talked my boss into getting the standard payroll by telling him it would deduct the the taxes for him.Now the more I read,it looks like it will not deduct state taxes......is this true.And if so how can I deduct those from the employees checks.

RE: One of the major difficulties in dealing with this issue is that W-2 forms do not have multi-state capability.

Actually, QuickBooks W2's will support multiple states for a single employee (up to 52), but not in the same pay period. Each paycheck can have just one state associated with it, and all earnings on the check are associated with the state on the check.

A really awkward workaround is to create a check for part of the earnings for the week for one state, and then edit the employee, change the state, and then create another check for the remaining pay. However, this will cause FWH to be significantly under-withheld. To compensate, you can elect extra withholding on the employee record. I would not recommend any of this, but it is possible.

Hi Fayce48,
Yes, Quickbooks will withhold state taxes and it does it quite well for most employees and employers since most of them only pay taxes to one state. Not only that, but it will also handle local city and county taxes as well as all the other taxes that politicians dream up.

That can't be possible. In the construction industry, you have to pay and withold for multiple states and you only deduct local tax if an employee works in that jurisdiction. In any given week, an employee will work at several different job locations, and taxes are withheld depending upon with local that person worked. This is standard in construction. I have the accountants versions and am shocked that I can not witholding taxes based on jobs. Please help!!!!

Just my 2 cents...

I would recommend one of the national payroll service providers such as Paychex, or ADP for processing your Multi-State payroll.

I used to work for Paychex, so I know a little bit about multi-state payroll... (It can be extremely complex)

Do your bookkeeping with Quickbooks... Leave your multi-State payroll to the experts.

Sorry, this isn't a feature QuickBooks offers at this time. It does seem like a good idea.

Yes, and it seems to me (although not a computer programmer) that this would be an easy add-on. All that would need to be done is a custom field in the "job tab" to select state (and local if applicable), and direct to withhold based on job indicated on the time entry. This same concept could then also be used for the workmen's comp calculation. This could expand Quickbooks market in the construction industry (particularly for companies located multi-state metropolitan areas).

Thanks
Deb

We run 2 companies out of the same office, based in NH. One company has employees work in NH and MA, often within the same week. The other company has employees in NH and VT.

NH does not have an Income tax. Employees pay Unemployment to the state where they live. Income tax is paid to the state where the work was performed (MA and VT do have Income Tax). Obviously, I need multi-jurisdiction payroll.

The best solution would be to have the jurisdiction set in the timesheet entry, either being able to set up the job in the proper state, or even separate service items or payroll items for each state. I called QB payroll service today and was told that it is possible. The rep will be here tomorrow.

I previously used Paychex, but it became a two-day task to enter payroll in both systems. ADP claims to be able to post to the general ledge through a data-import feature, but it is a mess. Been trying for two weeks, gonna fire them!

Any solution?

Please let us know how your conversation with the rep goes. It's unbelievable that the software isn't designed to deal with this very common scenario in the service industry.