State and Local wage reporting for remote workers in 2020

 Accounting & Taxation, Current Events, Tax Tips  Comments Off on State and Local wage reporting for remote workers in 2020
Nov 062020
 

The COVID-19 pandemic has raised a number of perplexing tax issues, and it doesn’t seem like there’s an end in sight. A good example is the state and local wage reporting conundrum for businesses and for workers.

Working from home has a unique set of perqs, but it also has its pitfalls. Combine those pitfalls with how many people were effectively “stuck” in their second homes, often in remote locations from their tax homes (across state lines, in many cases), and the income tax reporting can get very tedious.

For employers with remote workers, it is entirely possible that the location(s) of those workers may have triggered a nexus in a state (or states) where those employers would not otherwise be considered to “have employees.” This means that these businesses will have to report wages and should possibly have withheld income taxes in those locations, have registered with the related authorities, and possibly have paid contributions to state unemployment insurance funds there.

For employees, the situation is not any easier. It’s possible that income tax returns will have to be filed in states where those taxpayers may have maintained a second home, but where they have never before generated any income.

The AICPA has provided the following guidance for taxpayers, which states, in essence:

  1. Compile a list of any states where you’ve worked remotely during 2020.
  2. If you didn’t track the specific number of days worked in other states, try to approximate the number of days as best you can.
  3. Depending upon the state, income taxes may also be levied by cities, counties, municipalities, school districts, or other jurisdictions. Make sure you also track this level of detail.
  4. Consult a qualified tax advisor. He or she should be able to help determine relevant questions to ask based upon where services were performed and for how long.
  5. Check your state tax withholding (for as many states as may be required) and make any necessary adjustments. If your withholding (in any one of them) is too low, you may owe (additional) state taxes, interest, and penalties when you file your 2020 return(s).
  6. Going forward, be sure keep an ongoing record of all jurisdictions where you work remotely.

Again, this is not something that do-it-yourself, off-the-shelf tax software can provide. Only a qualified professional has the skills to advise as to the best course of action in these matters. There is no one-size-fits-all solution to issues such as these, but rather, each situation (for employers and for employees) must be considered on its own.

Rosenthal & Rosenthal, LLC is a public accounting firm comprised of principals who are Enrolled Agents, recognized to practice before the Internal Revenue Service. We stand ready to assist in these troubling times. Feel free to contact us to discuss your concerns.

Think twice before becoming an Uber Entrepreneur

 Accounting & Taxation, Tax Tips  Comments Off on Think twice before becoming an Uber Entrepreneur
Jul 022015
 

The allure of being your own boss is a strong pull for many to escape the traditional demands of a regular job. Recently, app-oriented companies (such as Uber, Washio, Postmates, Shyp, and others) have become popular ways for non-capitalized erstwhile entrepreneurs to enter the wide world of self-employment. Continue reading »

Things to consider regarding business service providers when closing accounts

 Accounting & Taxation, Tax Tips  Comments Off on Things to consider regarding business service providers when closing accounts
Sep 152014
 

Payroll services are great assets. As compliance becomes more and more a full time job, outsourcing this task to experienced providers has become a popular alternative to handling such matters in-house. A single penalty for a missed tax deposit can far exceed the cost of a good payroll service for an entire year.

Complications do arise, however, such as when starting up, switching from in-house to a provider, changing providers mid-year, or terminating a business mid-quarter or before W-2 season.

We recently had a situation where a client sold his business assets (but no the business). As his business entity no longer had payroll, he contacted the payroll provider to terminate his account (with no payroll to process and no income from further operations, it seemed a logical choice). Unfortunately, that left the final quarter’s payroll tax reporting undone, and us (as the accountants preparing the general ledger) unable to access his payroll data online.

While we can’t blame the service provider per se (the provider is not paid to maintain the data in the online portal or to provide any services whatsoever after the account is closed), the issue is that many clients seem to forget that even though payroll may have stopped after the first week of the payroll quarter, payroll returns will still be due following the end of the quarter, and year-end reports (Federal Form 940, at a minimum) and W-2’s (and W-3) will also be due the following January.

Most payroll service providers will require their clients to maintain accounts (even if no current payroll is being generated) for a nominal fee in order to prepare the quarterly and year-end reports, as well as the W-2’s, and clients should expect to likely pay a la carte for such reporting services, even if they were previously accustomed to a package deal (unless the provider offers a similar package for inactive employers).

As always, communication is key. In the case above, because we have an ongoing relationship with the payroll provider, we were able to obtain the reports necessary and get the dialog moving (again) between our client and the payroll provider to ensure that the reports will indeed be prepared for this year, and to obtain the data we needed to prepare the general ledger work in a timely fashion. It may be easy to mentally separate the roles of accountant and payroll service provider, but in truth, we both work together, complimenting each other’s service offerings, and a good accountant will strive to maintain a good rapport with the service provider to minimize the impact on the client of procedural and administrative matters.