3.
Re: Multi-State Business and Payroll Sep 3, 2009 5:53 PM
If you own a company with employees located in various states, you usually have to pay the withholding to the states they are using as their
State of Residence. To determine this, the ruling is that if you send an employee from New Jersey to California to work for a period of time less than one year, your employee's State of Residence is New Jersey for that placement, and they would be liable to pay the state withholdings to NJ. If that same employee will be there over a year, their State of Residence would be then be California, and you would have to file California State Taxes on them.
It is also important to know that if you send them from NJ to CA, and the original plan was for them to only stay for 8 months, and they end up having to stay 14 months, their State of Residence will still be NJ. If you or the employee determines that they will be staying on indefinitely, you need to switch the State of Residence to CA at that point, and you and your employee would have to file a tax return from both states that tax year, that would seperate the income between states. I would have a signed document that proves the original term was for less than one year, to prove that you were responsibly collecting the correct state withholdings.
Hope this helps.
