"A. G. Kalman" <glendale202-mtm[at]yahoo.com> wrote:
- quote -

WRONG - withholding is only required by an employer who has
a physical presence in the state in question. For example,
I live in Delaware and work for a company in Maryland.
There is no reciprocal tax agreement in place between DE &
MD. DE requires that I file a resident income tax return
because I live there. Maryland has a source income filing
requirement and requires I file a nonresident return because
I earned my income in MD.

My MD employer is required to withhold MD state income tax
(but not the county piggy back tax) because the company is
physically located in MD. However, while DE wants a return,
and some tax from me, since my employer is not physically
located in DE they are under no obligation to withhold and
remit DE withholding.

My employer can, if it so chooses as a matter of
administrative grace, agree to withhold and remit DE tax for
me, but this is done as nothing more than a courtesy for the
employer. There is no legal requirement.

In the situation you describe, you first need to determine
if a reciprocal tax agreement exists between the states that
would preempt the requirement to withhold in the source
income state. For example, in the DC Capital Area - if you
live in MD but work in VA you are NOT required to pay taxes
on your wages in both jurisdictions, only the one you
actually live in.

Then, you need to see if the employer has a physical
presence in the state of residence. For example, my
situation would be totally different if my company
maintained an office DE but I worked in MD. Once the
company establishes a physical presence in a state the
requirement for withholding of income tax for state
residents regardless of the actual work location arises.
Also note that a physical presence also establishes the need
to collect sales tax.

So, if there is no reciprocal tax agreement in place between
the resident and source income states the employer must
withhold state income taxes for the source income state and
MAY, at their sole discretion, accommodate the employee by
withholding state income tax for the employees state of
residence.

The original post mentioned ADP. ADP is one of the nation's
largest provider of payroll services. Certainly ADP should
be able to offer some guidance on the specific requirements.
Failing ADP's assistance, the employer should contact their
accountant for guidance.

The most important thing to remember is this - if the
employer fails to withhold it usually means the employee got
the money, thus making the employee liable for the taxes due
to both their resident state and the source income state.
I've seen cases where folks get the wrong information and
the employer fails to withhold income tax for the source
income state and elects to NOT accommodate the employee so
does not withhold resident state income tax - the employee
gets all the money in their paycheck each payday - and not
wanting to look a gift horse in the mouth, says NOTHING (way
bad move here btw). Then when tax times comes they find out
they owe money to BOTH states but of course have no cash
because they spent it.

(as Elmer Fudd would say) be wery wery caful,
Gene E. Utterback, EA

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Harlan Lunsford wrote:
- quote -

If one did not have nexus in a particular state I would
hesitate to make myself subject to some states tax
departments. They think they gain from their collection
activities but this may be a case where they may not.

--
Frederick E. Jorden http://Tax-Accounting-Payroll.com
7825 Midlothian Tpk - 207 Richmond, VA 23235-5247
EMAIL knowtax[at]bigfoot.com
(804) 320-6210 FAX (804) 320-6211

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A. G. Kalman wrote:
- quote -

I misread the post and thought the employee was working in
the other state. If the employee is only living in the
other state it could get a little complicated depending upon
whether the two states have a reciprocal tax agreement.
However, if the employer does not operate in the other
state, they would not have a withholding requirement for
that state.

Alan
http://taxtopics.net

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Cher wrote:

- quote -

I assume, from what you wrote, that the employee would still
be WORKING at your site in your state. If he works from
home, it might be different.

My understanding, only in my status as a California
employer, is that you don't have any obligation to withhold
tax in a state in which you have no nexus. Having an
employee living in the other state would not provide nexus.
If ADP has a presence in the other state, that also wouldn't
provide nexus.

If the company (not necessarily your division, but the
entire company) has no presence in the other state, you have
no obligation. The employee is on his own for paying state
estimated taxes.

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Cher wrote:

- quote -

Unless your company has a physical presence in the other
state, the ADP would have no basis for withholding state tax
for that one employee. Nor would your company be required
by said state to withhold merely because of his residence.
therefore employee is on his own for filing state estimated
taxes.

ChEAr$,
Harlan Lunsford, GC and EA n LA

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ctcdtm[at]juno.com (Cher) writes:

- quote -

Ordinarily if you don't do business in a state you're not
required to withhold for that state. You certainly may if
you want to, but otherwise the employee needs to do
estimated tax payments.

Phil Marti
Clarksburg, MD

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"Cher" <ctcdtm[at]juno.com> wrote

- quote -

The employee should direct the employer (who directs ADP) to
withhold that state's tax per the withholding certificate
the employee completes.

Have the employer contact ADP about this.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

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- quote -

A lot will depend on the states involved. Ask ADP, they
should know the answers.

Helen, EA in PA
50 miles, 3 days, 1 cause - Multiple Sclerosis Challenge Walk for the Cure
October 1 to October 3, 2004
Donate on-line at www.msandyou.org

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Cher wrote:

- quote -

If the state in which the employee is working has a
withholding requirement, then you as the employer must
withhold unless you receive the requisite state withholding
form from the employee reflecting a state tax exemption
(highly unlikely).

--
Alan
http://taxtopics.net

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Our state does not have an income tax, our company does our
payroll and business taxes thru ADP. One of our employees
is contemplating moving over the state line to a state with
income tax. Will we have to make adjustments with ADP to
withhold tax from his check or is the employee responsible
for claiming taxes on his own.

Thanks,
Newbie

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