Outsourcing Payroll Tax?

A remote working environment is here to stick around for a while. This effect of the Pandemic has truly changed how the workforce is adapting as we have seen companies increasing technology connectivity. It has also brought about the trend for employees to relocate to a state where their employer has not yet established a presence.

Initially, it seems that a remote employee relocation is straightforward, as they can work on a laptop with a cell phone from any location. However, for employers, there are payroll tax implications for their employees in these other states. Employers everywhere are feeling the consequences of payroll taxes.

Employers turn to both their payroll managers and their accountants for help; however, payroll tax work falls outside of the scope of both professionals. Thus, companies are turning to outsourcing payroll tax professionals, like Flex HR that have a payroll tax department set up to manage payroll tax work for companies everywhere.

 Payroll vs. Payroll Tax

 When Flex HR engages in outsourced payroll management, we assign a Payroll Manager to your company. They are responsible for engaging with employees on all aspects of their paychecks, answering questions about a deduction that was taken, or making a pay change. The Payroll Manager runs the payroll for the frequency that your business requires and submits a pre-process payroll review to the appropriate person to sign off each time. The Payroll Manager also maintains the reports needed for workers’ compensation audits and 401K 5500 reviews.

In addition, Flex HR provides a Payroll Tax Manager to set up the state unemployment insurance (SUI) and state income tax numbers (SIT). This has become much more relevant for companies as employees work remotely and might have moved to a state different than where the company is based. The Payroll Tax Manager will work to make sure that your company is compliant in all areas regarding payroll tax.

Our Payroll Tax Manager at Flex HR, Jessica Stafford admits “having a dedicated payroll tax manager is important because businesses cannot possibly keep up with the rapid changes in payroll tax legislation in all 50 states.”

Payroll Tax Outsourcing Relief

Establishing and managing payroll tax efforts are complicated without the proper HR administration. In addition to the Payroll Tax Manager setting up the SUI and SIT tax numbers, they may also need to create a local income tax (LIT).

Once these proper numbers have been set up for the new state(s), the employer must review human resources compliance tracking items for the affected states. It’s also crucial to update the employee handbook accordingly and monitor any customary operating procedures, including:

    • Posting jobs with the salary disclosed
    • Paying unused PTO upon the termination date
    • Following rules for salary requirements for hourly or exempt employees
    • Ensuring proper documentation required at termination for an exiting employee

 Dedicated Payroll Tax Department

Once Flex HR is engaged for payroll tax work with your company, a comprehensive approach is taken by an information gathering session to fully understand your payroll tax needs. We get a current employee count and determine where specific employees are located.

Then, we put together a plan for setting up current state tax-related payroll numbers and identifying the priority for each state. This involves communicating with different state and local agencies.

Working with your organization’s HR manager, we confirm all state human resources compliance items are properly documented as well as all state payroll tax numbers are entered correctly in the system for any affected employees.

Jessica explains a common situation we see all too often. “We’ve had new clients come in with hundreds of thousands of dollars tied up in liabilities to states where they weren’t aware of mandated programs that don’t exist is their home states. Managing your payroll taxes may mean the difference in bankruptcy or going public, so it’s important to work with someone you can trust to register for the proper statewide programs, notify you of any legislative updates, and guide you through this new world of remote employment.”

Employment and State-Related Taxes

Flex HR is experienced in investigating previous payroll tax issues and any retroactive fees or penalties. We support ongoing payroll tax issues at your company.

There are general employment taxes that must be paid for by the employer, regardless of the state such as:

    • Federal income tax withholding
    • FICA (Federal Insurance Contributions Act)
    • FUTA (Federal Unemployment Tax Act)
    • State-related tax implications

State-related tax implications are varied and sometimes involve local municipalities. For example, some states require employers to withhold state income tax, while other states don’t have a state income tax. Some cities have their own set of income taxes, which is an additional wage withholding. Other withholdings that may be required are paid family leave, short-term disability, and/or unemployment benefits.

Our Payroll Tax Managers also notify you if having an employee in a state may trigger additional taxes, such as sales or corporate income tax, so that your accountant can be ready to file the proper returns.

Across the country, employers trust Flex HR with their Human Resources and payroll issues. The payroll tax department and tax professionals within Flex HR can help employers immeasurably with recouping items owed, eliminating legal exposure, and minimizing risk.  Contact us now to get started!

Thank you for visiting our blog.

 

Jim Weber, Managing Partner – ITB Partners

Jim Weber – Managing Partner,  ITB Partners

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