Considerations for Ensuring Remote Work Compliance
As organizations implement return-to-office policies, it remains crucial for employers and payroll professionals to remain mindful of the intricacies associated with remote work compliance. While the landscape may be evolving, remote workers continue to constitute a significant portion of many organizations’ workforce.
Employers with remote workers residing within the United States must navigate various tax compliance complexities. This includes understanding and adhering to tax laws pertaining to withholding taxes, payroll taxes, and reporting obligations in the jurisdictions where remote employees are located. Consequently, prioritizing remote work compliance has become increasingly essential.
Key Considerations for Remote Work Compliance
1. Assess location accuracy: It is crucial to accurately determine where employees are physically working and the corresponding state they reside in. Gaining clarity on these factors should be a top priority.
2. Research state-specific regulations: When it comes to withholding taxes, thoroughly research how each state defines residents and nonresidents. Generally, non-resident employees require tax withholding unless specific thresholds or reciprocity agreements apply. Some states offer nonresident allocation forms for employees to declare their time spent in the state, enabling employers to rely on these attestations.
3. Understand convenience-of-the-employer rules: Certain states enforce payroll tax obligations on employees who work remotely for a company located in a different state. Familiarize yourself with convenience-of-the-employer rules, particularly in Arkansas, Connecticut, Delaware, Massachusetts, Nebraska, New York, and Pennsylvania.
4. Evaluate courtesy withholding: Employers opting for courtesy withholding, where taxes are withheld for employees in states where the employer isn’t registered, must register as a business in those states. While this may present administrative challenges, it can be a beneficial option for employees.
5. Stay informed on state tax court decisions: Monitor recent tax court decisions related to remote work, as they can impact tax liabilities. These decisions may include cases where income is deemed taxable in the employer’s state despite an employee working remotely from another state.
6. Pay attention to reporting details: Reporting requirements can be intricate, especially regarding New Jersey Temporary Disability Insurance (TDI) benefits and stock options. Properly communicate changes in employees’ work state to plan administrators, and consider allocation of bonuses and stock options based on employees’ state of residence.
States are actively considering additional employee benefits and scrutinizing remote work and business registration. Stay updated on trends and changes in various jurisdictions to ensure compliance. Contact us today and let us help you if you need assistance with return-to-office policies.