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Payroll Tax Withholding - State Lived is Different than State Worked With Reciprocity Between the States

  • 26 April 2022
  • 5 replies
  • 189 views
M
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We have a client who is getting ready to go-live with payroll.  They have a multi-state payroll with many unions and many certified projects.  They have just told me that they have several employees who live in one state (e.g. WI), but work in a different state (e.g. IL) and there is reciprocity between the states.  So the employee can choose which state that want for State Income tax withholding.  Which isn’t a big deal, it can be done with the Work Location.  Here’s the kicker….The unemployment tax has to be go to the state worked, regardless of the state the employee chooses for withholding.  In my example, the employee lives in WI and want state income tax withholding in WI, but works in IL so the system needs to calculate IL SUTA tax.  Any ideas on how to achieve this?

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Best answer by mccullocht 29 September 2022, 20:59

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pbennett
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Please test this as I dont knwo if it would work or not but you could manipulate the taxes by letting the system add the taxes it seem necesary and then uncheck the once you dont want and add the SUTA you want. if you make the work location IL then it will pull the correct SUTA and you can add the SIT for WI. Please test but it seems that would work.

 

Patricia Bennett
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Were you able to get this to work?

M
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For the client, they made the decision that the income tax would be withheld based on the state in which the employee lives.  If the employee works in a different state then the SUTA is supposed to be paid to that state.  This is accomplished with the Federal tax setting “Based of Operations State”, is used to “Specify in which state the tax engine should withhold the SUTA tax if the employee is working in multiple states.”

 

S
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Thank you.  I can now get the unemployment to calculate for the correct state but the income tax also calculated for that state (ND) even though I have the box checked for the state he lives in that it is his home state (MN).  The work location is ND but he lives in MN.

M
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In my experience, the work location assigned to the payroll earnings record(s) is what drives the calculation of the income taxes.  The location assigned to the payroll earnings record(s) defaults from the “default” location assigned to the employee.  In the case of our client, they have work locations setup for the different states where they are a registered employer.  So if you want the income taxes withheld as MN, then the employee needs to be assigned to a MN work location.

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