Spring means outdoor weather, baseball... and tax deadlines.
Your company pays the Federal Unemployment Tax (FUTA) to the federal government but most states also require a state unemployment insurance (SUI) tax. The rules for SUI taxes vary from state to state and can be very complex, especially for employers who have workers who cross state lines.
For example: In Tennessee, having just one employee – regardless of the amount of payroll or the length of time in the state – can trigger the tax, according to the Tennessee Department of Labor & Workforce Development.
SUI More Complex for Companies that Operate Across State Lines
Which state gets the taxes? That depends. For employees who live in one state but work in another, the state in which the employee works will receive the taxes. If they temporarily work in a new state, SUI is paid to the state in which the employee is usually based. If an employee is permanently transferred to a new state, the SUI money goes to the new work state. For work done in multiple states, the SUI is paid to the state where the business is based, such as a home office or mailing location.
State Tax Rates Vary Making Compliance More Difficult
Calculations are tricky because each state has its own tax rates and employee wage-based limits. According to the New York State Department of Labor., the new 2018 employer rate in that state is 3.525% with a re-employment service fund rate of 0.075%, totaling 3.6%,
In most states, new employers get a discount. In California, new employers pay 3.4% of the first $7,000 paid to employees for the first three years. In the following years that amount can increase to up to 6.2% or $434 per employee. There's also N/A experience rating, which can lower the tax rate from the new employer rate, if you establish a history of not having employees/former employees that can claim benefits.
Since each state varies in the amount of taxes due, it is a best practice for companies to plan ahead and keep up with the new rates so that funds are put aside for future taxes. This helps businesses stay in compliance and avoid costly penalties and fees.
Software that Calculates SUI is Perfect for Multistate Processing
At Payroll Tax Management, our FlexTax software takes the work out of keeping up with SUI taxes, especially if you are navigating the requirements and tax rates of multiple states. FlexTax is a shared system that gives you access to a comprehensive online payroll tax system while we handle deposits and tax compliance, including the impounding of tax funds and reconciliation of impound accounts. FlexTax software calculates what is owed to each state and keeps up to date on state laws and tax discounts so that your company does not overpay or underpay SUI taxes.
With PTM and FlexTax on the job, you can spend more time managing your business and less time managing your taxes.