PAYROLL INSIGHT
Applying unemployment wages to the correct state in the USA
LaTisha O’Neal CPP, payroll supervisor at Bama Companies Inc and a member of PayTech’s board of contributing writers, outlines the rules
E mployers are required to pay unemployment insurance based on wages regardless of an employee’s position, length of employment, or location. The federal unemployment insurance process is fairly simple. Currently, the annual limit for taxable wages is $7,000 per employee with a tax rate of 6% and a possible credit of 5.4% for a deposit rate of 0.6%. States are a little more challenging. First, the employer will need to determine unemployment insurance wages only to one state at a time for an employee. If an employee works in one state only, then the wages for that employee are reported to the state in which the employee works. If the employee works in more than one state, it is more complicated. Below are four questions that can help employers determine to which state to allocate wages for an employee for unemployment insurance purposes. ● Are the services performed by the employee localised? If an employee occasionally performs services in more than one state but works in one state a majority of the time, the employer should report the wages to the state where the majority of the employee’s time is spent. For example, if an employee is based and works in Alabama and occasionally goes to another office in Louisiana, the employer should allocate all wages to Alabama for unemployment. ● Where is the employee’s base of operations? If the employee spends the same amount of time in more than one state, then the employer would need to to which state it should allocate an employee’s wages. Unlike income tax withholding, employers allocate
determine where the employee has his or her base of operations. (Where is his or her office located? This may include an office at a company location or an office in the employee’s home.) The state in which the employee has his or her base of operations is where the wages should be reported. For example, if an employee spends the same amount of time working in California, Oregon, and Nevada, but has his or her district office in Oregon, Oregon is the state where wages should be reported. ...employers allocate unemployment insurance wages ● No base of operations? Then, where does the employee receive direction? Is there a place of direction or control in one of the states where the employee performs services? For example, if a salesman spends the same amount of time with customers in Texas, Louisiana, and Oklahoma and receives his directions from his supervisor who is based in Texas, then the state unemployment wages should be reported to Texas. ● Where does the employee live? Although rare, an employer may need to make a decision on unemployment wages based on this factor. That’s because the unemployment state where wages are allocated must be a state where the employee has worked during the quarter. For example, if an employee works the same amount of time in Alabama, Louisiana, and Texas and receives direction from a supervisor based in Georgia, an
employee’s resident state would be the state unemployment wages should be reported to, assuming the employee performs some work there. After the wages have been allocated to the appropriate state, the employer would apply the taxable wage base for that state and the employer rate assigned to calculate the unemployment insurance deposit for the quarter. n This article was published in the December 2016 issue of the American Payroll Association’s PayTech magazine. The American Payroll Association (APA), www.americanpayroll.org, is the USA’s leader in payroll education, publications, and training. This nonprofit association conducts more than 300 payroll training conferences and seminars across the country each year and publishes a complete library of resource texts and newsletters. Representing more than 21,000 members, APA is the industry’s highly respected and collective voice in Washington, D.C. The Global Payroll Management Institute (GPMI), www.GPMInstitute.com, spearheads the APA’s global initiatives to provide the world with a leading community of payroll leaders, managers, practitioners, researchers, and technology experts. Subscribers connect with each other through networking discussions, collaborative opportunities, and access to education and publications dedicated to global payroll strategies, knowledge, research, employment, and training. GPMI also publishes several global payroll texts and white papers as a benefit to subscribers.
28
| Professional in Payroll, Pensions and Reward | September 2017 | Issue 33
Made with FlippingBook HTML5