If your employees move between states, determining where to report their wages can be confusing. As a rule, an employee’s wages should be reported to only one state per quarter, even if they work in more than one state during that time.
Here are four factors to consider when determining where you should report an employee’s wages:
1. Where does the work take place?
If 80% or more of an employee’s regular services take place in one state, 100% of their wages should be reported to that state. Regular services refer to primary duties and do not include periodic meetings, commuting, or any services that are incidental, temporary, or transitory in nature.
2. Where is the employee’s base of operations?
If #1 does not apply, consider the employee’s base of operations. The base of operations is the place, usually permanent in nature, from which the employee begins working and to which they customarily return to perform duties, receive instructions from a superior, or communicates with customers. A job-site office is one example of a base of operations.
3. Place of direction and control
If neither #1 nor #2 apply, report the wages to the state where you (i.e., the employer) exercise general direction and control over the employee. Usually this will be your company’s headquarters.
4. Place of employee’s residence
If none of the above apply, report the employee’s wages to their state of residence, but only if the employee performs some services in that state.
Make the right call when reporting wages
Properly reporting wages is key to avoiding a penalty. If you have questions about reporting employee wages, we’re here to help. Our CPAs can guide you through the reporting process and calculate your employees’ wages for each state if needed. To learn more, contact us today.