The following
information was provided in a seminar conducted by the American
Payroll Association.
From a basic rule of thumb to three rules
Withholding rule number 3: Resident/non-resident taxation policies
Nexus: Business connection
Withholding on residents working out of the state and
non-residents table
For Which State Must You
Withhold?
If your company
has operations in more than one state, you may be faced with
income tax withholding for more than one state. Sometimes, you may
even have to withhold income tax for more than one state from the
same employee. Withholding can get even more complicated when you
have employees who live in a different state than the one they
work in or who perform services in more than one state.
Deciding which state's income tax to
withhold can be a confusing process. How do you determine who is a
resident and whether you should follow the laws of the state of
residence or the laws of the state in which services are
performed? Not all states answer these basic questions in the same
way and, sometimes, state laws conflict. Even the simple word
"operations,'' as used in the paragraph above, is more complex
than you might think.
The default rule
of state income tax withholding that can be used as a starting
point is to withhold income tax for the state in which services
are performed. It can be applied in most situations in which tile
employee lives and works in the same state (assuming it is not one
of the nine states without income tax withholding: Alaska,
Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas,
Washington, and Wyoming).
However, up to
three other withholding rules may have to be considered when the
situation is not as straightforward. For example, an employee who
lives and works in one state may still be a resident of some other
state; that's where withholding Rule No. 1 comes into play. In
this scenario, the employee may have income tax liability for the
state of residency, and, if you have operations in that state and
meet certain other criteria, you may be required to withhold for
that other state. On the next level, if an employee lives in one
state and works in another, each state's laws of reciprocity
(withholding Rule No. 2) and resident/non-resident taxation
policies (withholding Rule No. 3) must be examined.
The very first
determination that must be made is the state of residence of the
employee. This is primary because a resident of a state is subject
to the laws of that state, including its income tax laws.
Furthermore, states have varying policies on withholding from
residents who perform services in another state and from
nonresidents who perform services within the state. To locate and
apply the policies correctly, you'll need to know which state(s)
can claim the employee as a resident.
Employees commonly claim that they are a
resident of their "home" state. If the employee has relocated to
work for you, he/she may assert that the former state is his/her
state of residence because he/she still has a home and family
there (and doesn't want to complete personal income tax returns
for two states). An employee who works for you only during the
nine months of the school year, for example, might try to claim
that she is a resident of the state she grew up in but in which
she now spends only three months of the year. This may be
especially likely if her home state doesn't have an income tax.
It's up to you to
locate and follow the rules of the appropriate state. Most states
have a two-pronged definition of residency, outlining that someone
will be a resident by either:
1.
Being domiciled
in the state, or
2.
Spending more
than a certain number of days in the state.
The term "domicile" usually means the place
where an individual has a true, fixed, permanent home and
principal establishment, and it usually means the place to which
the individual intends to return. Common indicators that an
individual is domiciled in a particular location include:
·
Property
ownership
·
Bank accounts
·
Driver's license
and vehicle registration
·
Voting
registration
·
Presence of
family
·
Club and church
memberships
For example, New
York claims as a resident anyone who is either of the following:
·
Domiciled in the
state, or
·
Maintains a
permanent place of abode and spends more than 183 days of the year
in the state
|
|
STATE
DEFINITIONS OF A RESIDENT FOR INCOME TAX WITHHOLDING
|
|
|
Alabama |
A person
having a permanent place of abode or who is domiciled in the
state and spends more
than seven months a year in the state
|
|
|
Alaska |
Not
applicable
|
|
|
Arizona |
A person
domiciled or who spends more than nine months a year in the
state
|
|
|
Arkansas |
A person
domiciled in the state or who maintains a residence and spends
six months a year in
the state
|
|
|
California |
Withholding
required for residents and nonresidents
|
|
|
Colorado |
A person
maintaining a permanent place of abode or domiciled in the
state and spends more
than six months a year in the state
|
|
|
Connecticut |
An individual
who is domiciled or has a permanent place of abode in the
state and spends
more than one half of the year in the state
|
|
|
Delaware |
A person who
is domiciled, maintains a permanent place of abode, and spends
more than 183
days a year in the state
|
|
|
District of
Columbia |
A person
domiciled or residing or has a place of residence in the state
tbr more than seven
months in the year
|
|
|
Florida |
Not
applicable
|
|
|
Georgia |
A person
moving in or out of the state is taxed only on income received
in the state
|
|
|
Hawaii |
Any
individual domiciled or residing in the state. Reside is to
spend more than 200 days a
year in the state
|
|
|
Idaho |
A person who
is domiciled, and maintains a place of abode for thc entire
year and resides in the state more than 270 day a year
|
|
|
Illinois |
Any person
who is in the state for other than a temporary or transitory
purpose during the year
|
|
|
Indiana |
Anyone who
resides, maintains a place of legal residence and spends more
than 183 days of the year in the state
|
|
|
Iowa |
A person
domiciled in or maintaining a permanent place of abode in the
state
|
|
|
Kansas |
A person
domiciled in, maintaining a permanent abode, and spending more
than six months a year in the state
|
|
|
Kentucky |
A person who
is domiciled, maintains a permanent place of abode, and spends
more than 183 days a year in the state
|
|
|
Louisiana |
Anyone
domiciled, maintaining a permanent place of abode, or who
spends more than six months of the year in thc state
|
|
|
Maine |
A person who
is domiciled, maintains a permanent place of abode, and spends
more than 183 days a year in thc state
|
|
|
Maryland |
Anyone
domiciled in the state on the last day of tile year or who
maintains a place of abode within the state
|
|
|
Massachusetts |
A person who
is domiciled, maintains a permanent place of abode, and spends
more than 183 days a year in the state
|
|
|
Michigan |
An individual
who lives in the state at least 183 days in the year
|
|
|
Minnesota |
An individual
domiciled in the state or outside of the state who maintains a
place of abode and spend more than one half of the year in the
state
|
|
|
Mississippi |
A person
domiciled in the state
|
|
|
Missouri |
A person
domiciled or who spends more than 183 days of the year in the
state
|
|
|
Montana |
An individual
who has a domicile or who maintains a permanent place of abode
within the state and has not established residence elsewhere
|
|
|
Nebraska |
A person who
is domiciled, maintains a permanent home and spends more than
six months of the year in the state
|
|
|
Nevada
|
Not
applicable
|
|
|
New Hampshire |
Not
applicable
|
|
|
New Jersey |
Any person
domiciled in the state for the full year or is not domiciled
in the state but maintains a permanent home and spends more
than 183 days of the year in the state
|
|
|
New Mexico |
A person
domiciled in the state
|
|
|
New York |
A person
domiciled or who maintains a permanent place of abode and
spends more than 183 days of the year in the state
|
|
North
Carolina |
Withholding
required for residents and nonresidents
|
|
North Dakota |
An individual
domiciled, or who maintains a permanent place of abode within
the state and spends more than seven months of the year in the
state
|
|
Ohio |
A person
domiciled in, living in, or who maintains a permanent place of
abode in the state and doesn't spend more than 335 days
outside of the state
|
|
Oklahoma |
A person who
maintains a permanent place of abode, or is domiciled in the
state and spends more than seven months of the year in the
state
|
|
Oregon |
A person
domiciled or who maintains a permanent place of abode and
spends more than 200 days of the year in the state
|
|
Pennsylvania |
A person who
is domiciled in the state(unless a permanent place of abode is
maintained else where and no more than 30 days are spend in
the state) annually or is not domiciled in the state but
maintains a permanent place of abode in the state and spends
more than 183 days a year in the state
|
|
Rhode Island |
A person
domiciled or who maintains a permanent place of abode and
spends more than 183 days of the year in the state
|
|
South
Carolina |
A person
domiciled in the state
|
|
South Dakota |
Not
applicable
|
|
Tennessee |
Not
applicable
|
|
Texas |
Not
applicable
|
|
Utah |
A person
domiciled or who maintains a permanent place of abode and
spends more than 183 days of the year in the state
|
|
Vermont |
A person
domiciled or who maintains a permanent place of abode and
spends more than 184 days of the year in the state
|
|
Virginia |
A person
domiciled or who maintains a permanent place of abode and
spends more than 183 days of the year in the state
|
|
Washington |
Not
applicable
|
|
West Virginia |
A person
domiciled or who maintains a permanent place of abode and
spends more than 183 days of the year in the state
|
|
Wisconsin |
A person who
is domiciled in the state
|
|
Wyoming |
Not
applicable
|
| |
|
|
|
|
|
If an employee
performs services in a state other than the state of residence,
you must find out whether the two states have a reciprocal
agreement. A reciprocal agreement allows you to withhold only for
the state of residence, as opposed to the state in which services
are performed. (This is an example of why the rule of thumb is
only a starting point.) Accordingly, you would report wages only
to the state of residence when completing boxes 16-17 (state
wages) of federal Form W-2, Wage and Tax Statement. In most cases,
the employee will be required to submit a certificate of
non-residence for the state in which he/she works before you can
honor the reciprocal agreement.
The general
purpose of reciprocity is to make things administratively easier
for the employee and employer. The employee will have to file only
one state personal income tax return, and the employer will
withhold only for the state in which the employee lives. This is
especially helpful if you have an employee who performs services
in two or more states that have reciprocity with the state of
residence. For example, for an employee who lives in the District
of Columbia, works in D.C., Virginia, and Maryland, and submits
certificates of non-residence for Virginia and Maryland, the
employer will need to withhold only D.C. income taxes because the
three jurisdictions have reciprocal agreements with each other.
Without reciprocity, the employer would have to withhold for all
three jurisdictions based on the time worked in each one.
On the other
hand, the presence of a reciprocal agreement requires you to
change the state of withholding and reporting if the employee
moves his/her residence from one state to another, even though
there has been no change in the state in which the services are
performed.
|
|
|
RECIPROCAL
WITHHOLDING AGREEMENTS BETWEEN STATES
|
|
|
|
Alabama |
None
|
|
|
|
Alaska |
Not
applicable
|
|
|
|
Arizona |
None
|
|
|
|
Arkansas |
Residents of
Texarkana, Arkansas are exempt from Arkansas state income tax
and withholding. Residents of Texarkana, Texas are exempt from
Arkansas income tax for wages earned in Texarkana, Arkansas.
Agreement does not apply to residents of other cities or other
Texas residents working in other parts of Arkansas.
|
|
|
|
California |
None
|
|
|
|
Colorado |
None
|
|
|
|
Connecticut |
None
|
|
|
|
Delaware |
None
|
|
|
|
District of
Columbia |
Reciprocal
agreements with Virginia and Maryland. Non-Residents of
District of Columbia filling out a Certificate of Nonresidence
are not subject to DC withholding unless they voluntarily
request the withholding.
|
|
|
|
Florida |
Not
applicable
|
|
|
|
Georgia |
None
|
|
|
Hawaii |
None
|
|
|
Idaho |
None
|
|
|
Illinois |
Residents of
Iowa, Kentucky, Michigan or Wisconsin are not subject to
Illinois income tax withholding for wages earned in Illinois
if an Employee's Statement of Non-Residence in Illinois is
filed with the employer. The reciprocal agreement with Indiana
expired at the end of 1997.
|
|
|
Indiana |
Residents of
Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin are not
required to have Indiana withholding. The reciprocity is not
applicable to county income taxes. The reciprocal agreement
with Illinois expired at the end of 1997.
|
|
|
Iowa |
Residents of
Illinois have Illinois state tax withheld only if the
Employee's Statement of
Nonresidence in Iowa is filed with the employer.
|
|
|
Kansas |
None
|
|
|
Kentucky |
Resident of
Illinois, Indiana, Michigan, Ohio, West Virginia, and
Wisconsin have only their resident state tax withheld if a
Certificate of Nonresidence is filed with the employer. Daily
commuters between Kentucky and Virginia are provided
reciprocal benefits.
|
|
|
Louisiana
|
None |
|
|
Maine
|
None |
|
|
Maryland |
No Maryland
tax is withheld from employees who commute daily to Maryland
and reside in the District of Columbia, Pennsylvania, Virginia
and West Virginia. A certificate of nonresidence must be filed
with the employer.
|
|
|
Massachusetts
|
None |
|
|
Michigan |
Michigan
employers do not withhold Michigan state income tax from
residents of Illinois, Indiana, Kentucky, Minnesota, Ohio, and
Wisconsin. Michigan employees must file certificates of
nonresidence to be exempt from withholding. A form is not
provided.
|
|
|
Minnesota |
Residents of
Michigan, North Dakota, and Wisconsin are exempted from
Minnesota withholding. A reciprocity Exemption from Minnesota
Withholding, Affidavit of Residency is required to certify
residency.
|
|
|
Mississippi |
None
|
|
|
Missouri |
None
|
|
|
Montana |
Montana
employers are not required to withhold Montana income tax from
residents of North Dakota. A certificate of North Dakota
residency is required.
|
|
|
Nebraska |
None
|
|
|
Nevada
|
Not
applicable
|
|
|
New Hampshire |
Not
applicable
|
|
|
New Jersey |
Pennsylvania
residents filling out a certificate of nonresidence are not
subject to New Jersey withholding.
|
|
|
New Mexico |
None
|
|
|
New York |
None
|
|
|
North
Carolina |
None
|
|
|
North Dakota |
Residents of
Minnesota and Montana working in North Dakota are not required
to have North Dakota tax withheld. An Affidavit of Residency
should be filed with their employer annually.
|
|
|
Ohio |
Ohio has
reciprocal agreements with Indiana, Kentucky, Michigan,
Pennsylvania, and West Virginia. Employee's Statement of
Nonresidence in Ohio must be filed with the employer to claim
the exemption.
|
|
|
Oklahoma |
None
|
|
|
Oregon |
None
|
|
|
Pennsylvania |
Pennsylvania
has reciprocal agreements with Indiana, Maryland, New Jersey,
Ohio, Virginia, and West Virginia. An Employee Statement of
Non-residence and Authorization to Withhold Other States'
Income Tax must be filed with the employer. For New Jersey
residents who work in Pennsylvania, the amount of any
Pennsylvania local income tax withholding reduces the amount
of New Jersey income tax to be withheld from those same wages.
|
|
|
Rhode Island |
None
|
|
|
South
Carolina |
None
|
|
|
South Dakota |
Not
applicable
|
|
|
Tennessee |
Not
applicable
|
|
|
Texas |
Not
applicable
|
|
|
Utah |
None
|
|
|
Vermont |
None
|
|
|
Virginia |
Full
reciprocal agreement with West Virginia but a certificate of
nonresidence in Virginia must be filed. Daily commuters from
Kentucky, Maryland, and District of Columbia filing a
certificate of nonresidence are exempt from Virginia tax.
Pennsylvania and West Virginia residents can file the
certificate only if subject to the state income tax of the
resident state. A form for a credit for income tax paid to
another state is available to Arizona, California, District of
Columbia, Maryland and New Mexico residents working in
Virginia and must be completed annually for the withholding
credit.
|
|
|
Washington |
Not
applicable
|
|
|
West Virginia |
Reciprocal
agreements are in place with Kentucky, Maryland, Ohio,
Pennsylvania, and Virginia. A withholding exemption
certificate must be filed with the employer.
|
|
|
Wisconsin |
Illinois,
Indiana, Kentucky, Michigan and Minnesota residents working
within Wisconsin must provide a written statement to their
employer certifying the place of residence in order for the
employer to not withhold Wisconsin income tax. Minnesota
residents are required to fill out the Statement of Minnesota
residency annually. Others must fill out Nonresident
Employee's Withholding Reciprocity Declaration.
|
|
|
Wyoming |
Not
applicable
|
If an employee is a resident of one state
but performs services in another, and there is no reciprocal
agreement, you must consider the laws of both states. The correct
determination of the state of residency (Rule No. 1) is very
important in these situations because it tells you which state's
laws you may need to consider in addition to those of the state in
which the employee works.
The state in
which the services are performed will almost always require
withholding from non-residents who come into the state to work
(withholding only from the wages for services performed in that
state). A few states have exceptions to this, usually based on
whether the employee works in the state for less than a certain
length of time or earns less than a certain amount of money. For
example, if a South Carolina resident works in Georgia, Georgia
withholding is required if the work is for a period of more than
23 days during a calendar quarter. In general, an employer is
always subject to the laws of any state in which it has an
employee performing services, whether or not the employer has
facility (such as an office, factory, or store) in the state.
The employee's
state of residence may also need to be considered even if the
employee doesn't work there. If the employer has a business
connection, also referred to as "nexus", with the state in which
the employee resides, then the employer is subject to the laws of
that state even if the employee doesn't work there. For example,
if the South Carolina resident works exclusively in Georgia for
six months, and if the employer has nexus with South Carolina:
·
Georgia
withholding is required (the 23-day threshold is exceeded), and
·
South Carolina
withholding is required, with a credit for income tax withheld for
the work-state (in this case, Georgia).
In this
situation, the employer must first calculate and withhold Georgia
income tax. Then the employer must calculate South Carolina income
tax on the same wages and, if the South Carolina tax is greater,
withhold an amount equal to the difference between the South
Carolina income tax and the Georgia income tax. If the South
Carolina tax is less than the Georgia tax, no South Carolina tax
need be withheld.
If, however, the
employer does not have nexus with South Carolina, then the
employer is not subject to the laws of that state and is not
required to withhold that state's income tax. However, the
employee may have personal income tax liability on these and all
other earned wages by virtue of being a resident of that state.
The word "nexus"
literally means "connection." In the withholding context, the
employer's concern is whether it has a business connection, or
any operations, within a state. If it does, it is subject to the
withholding tax laws of that state. This will make the difference
in whether an employer has to withhold income tax for an
employee's resident-state even though he/she performs no services
there.
Nexus is established by having a business
presence in a state. An office, store, or factory will create
nexus, as will the mere entry of an employee into a state to make
a sale or perform a service call. A guide to each state's roles on
determining nexus is available by calling the American Institute
of Certified Public Accountants at 1-888-777-7077 and asking for
product 061057, the State Tax Nexus Checklist Practice Guide. It
is free for members of AICPA's tax section, $29 for other AICPA
members, and $39 for non-members.
If an employer doesn't have nexus in a
state for which one of its employees will have a personal income
tax liability, it can choose to establish a withholding account in
that state and begin withholding as a courtesy to its employees.
However, the payroll department should check with the corporate
tax and legal departments of the company first because once you
voluntarily register for one tax, you may receive inquiries from
the state about other taxes for which you aren't liable, such as
sales tax or corporate income tax. Also, in some states,
withholding and paying over taxes may thereby establish nexus,
making your company open to be sued in the courts of that state.
If an employee works in multiple states
that do not have reciprocity with the employee's state of
residence, then the amount of wages earned in each state must be
separately examined under withholding Rule No. 3. The first step
is to split the wages by state, which may be done by the number of
hours worked for an hourly employee or days worked for a salaried
employee, or by the sales volume for a commissioned salesperson.
The employer will definitely have nexus in the state in which
services are performed and will most likely (depending on the
state's law) need to withhold the work-state's tax from the wages
earned within the state. In addition, if the employer has nexus in
the employee's resident-state, it may need to consider
withholding for that state from these wages as well.
There are exceptions to this process under
the Amtrak Reauthorization and Improvement Act of 1990. Railroad
and motor carrier employees who work in more than one state are
subject only to the state and local income tax laws of their state
of residence, regardless of where they work. Employees in air
transportation are subject to withholding for their state of
residence and any other state in which they earn more than half
of their wages.
|
WITHHOLDING
ON RESIDENTS WORKING OUT OF STATE AND NON-RESIDENTS
|
|
STATE |
RESIDENTS
-W/H REQUIRED ON
SERVICES PERFORMED
OUT OF STATE, IF NEXUS |
NON-RESIDENTS
-W/H
REQUIRED ON SERVICES
PERFORMED IN STATE
|
|
Alabama |
Withhold
where services are performed, required if no state income tax
withholding in work state
|
Yes |
|
Alaska
|
Not
applicable |
Not
applicable |
|
Arizona
|
Withhold
where services are performed |
Yes, if
physically present in state for 60 days or more
|
|
Arkansas |
Withhold
where services are performed, required if no state income tax
withholding in work state
|
Yes but see
reciprocity |
|
California |
Yes with
credit if income tax is withheld for the work state
|
Yes |
|
Colorado |
Withhold
where services are performed
|
Yes except
for short work duration with state approval |
|
Connecticut |
Yes with
credit if income tax is withheld for the work state
|
Yes |
|
Delaware |
Yes with
credit if income tax is withheld for the work state
|
Yes |
|
District of
Columbia
|
No |
No, withhold
based on state of residency |
|
Florida
|
Not
applicable |
Not
applicable |
|
Georgia |
Yes with
credit if income tax is withheld for the work state
|
Yes |
|
Hawaii |
Yes if
regular place of employment is on HI or wages paid from within
state |
Yes, unless
paid from another state and expected to
work in state less than 60 days
|
|
Idaho |
No |
Yes |
|
Illinois
|
Yes |
Yes but see
reciprocity |
|
Indiana
|
Employers are
not required to withhold |
Yes but see
reciprocity |
|
Iowa |
Yes with
credit if income tax is withheld for the work state |
Yes unless a
Form 44-017 is issued or Form 44-0016 is
completed for Illinois residents
|
|
|
Kansas
|
Yes with
credit if income tax is withheld for work state |
Yes |
|
|
Kentucky
|
Voluntary for
employers |
Yes but see
reciprocity |
|
|
Louisiana |
No, unless
not state income tax withholding in work state
|
Yes |
|
|
Maine |
Yes
|
Yes |
|
|
Maryland
|
Yes with
credit if income tax is withheld for the work state |
Yes but see
reciprocity |
|
|
Massachusetts |
Yes with
credit if income tax is withheld for the work state |
Yes
|
|
|
Michigan |
Yes |
Yes but see
reciprocity
|
|
|
Minnesota |
Yes with
credit if income tax is withheld for work state |
Yes but see
reciprocity
|
|
|
Mississippi |
Yes with credit if income tax is withheld for work state |
Yes
|
|
|
Missouri |
Yes except if
50% or more of work is out of state and have completed Form
MO W-4C
|
Yes |
|
|
Montana |
Yes
|
Yes but see
reciprocity |
|
|
Nebraska |
Yes with
credit if income tax is withheld for work state |
Yes
|
|
|
Nevada
|
Not
applicable |
Not
applicable |
|
|
New Hampshire |
Not
applicable
|
Not
applicable |
|
|
New Jersey
|
Yes with
credit if income tax is withheld for work state |
Yes but see
reciprocity |
|
|
New Mexico |
Yes
|
Yes except if
work is for 15 or less days in the state
|
|
|
New York |
Yes with
credit if income tax is withheld for work state
|
Yes |
|
|
North
Carolina |
Yes but only
withhold where services performed unless no state income tax
withholding
|
Yes |
|
|
North Dakota |
Yes but only
withhold where services performed unless no state income tax
withholding in work state
|
Yes but see
reciprocity |
|
|
Ohio |
Yes but only
withhold where services performed unless no state income tax
withholding in work state
|
Yes but see
reciprocity |
|
|
Oklahoma |
Yes but only
withhold where services performed unless no state income tax
withholding in work state
|
Yes except
for earnings of less than $300.00 in calendar quarter |
|
|
Oregon |
Yes. If
employer does not have nexus, the state requests withholding
for the convenience of employee
|
Yes |
|
|
Pennsylvania |
Yes but only
withhold where services performed unless no state income tax
withholding
|
Yes but see
reciprocity |
|
|
Rhode Island |
Yes with
credit if income tax is withheld for work state |
Yes
|
|
|
South
Carolina |
Yes with
credit if income tax is withheld for work state |
Yes except if
the employment is only occasional
|
|
|
South Dakota |
Not
applicable
|
|
|
|
Tennessee |
Not
applicable |
Not
applicable
|
|
|
Texas |
Not
applicable |
Not
applicable
|
|
|
Utah |
Yes with
credit if income tax is withheld for work state |
Yes, unless
employer doing business in state less then 60 day in a year
and has received certificate from Utah
|
|
|
Vermont |
Permitted -
not required |
Yes
|
|
|
Virginia |
Yes but only
withhold where services performed unless no state income tax
withholding
|
Yes but see
reciprocity |
|
|
Washington |
Not
applicable |
Not
applicable
|
|
|
West Virginia
|
Yes |
Yes but see
reciprocity |
|
|
Wisconsin |
Yes |
Yes except if
earning are less than $1500 a year and see reciprocity
|
|
|
Wyoming |
Not
applicable |
Not
applicable
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
STATE
TAXATION AND WITHHOLDING ON BENEFITS
|
|
State |
Group Term
Life
Over $50,000
|
Moving
Expenses |
Educational
Assistance |
|
South
Carolina |
X |
X |
X
|
|
South Dakota |
Not
applicable
|
|
|
|
Tennessee |
Not
applicable
|
|
|
|
Texas |
Not
applicable
|
|
|
|
Utah |
X |
X |
X
|
|
Vermont |
X |
X |
X
|
|
Virginia |
X |
X |
X
|
|
Washington |
Not
applicable
|
|
|
|
West Virginia
|
X |
X |
Non job
related is taxable |
|
Wisconsin
|
X |
X |
X |
|
Wyoming
|
Not
applicable
|
|
|
New Jersey and
Pennsylvania
Benefit
NJ PA
Sec. 125
(cafeteria plan)
taxable – 1 fed – 2
Sec. 129
(dependent care)
taxable taxable,
unless it is an employer provided dependent care facility
GTL > $50K
fed
non-taxable
401(k)
fed taxable
Moving expenses
fed 3
Educational
assistance
4 --
non-job related: taxable
-- job-related:
excludable only if education is required by either the law or the
employer
Personal use of a
company car fed
non-taxable
Transportation
fringe
5 6
Partial-wage
sick-pay from employer
non-taxable non-taxable
or third party
sick-pay
Notes for above
Fed
follows federal
1.
Deductions from
employee pay to pay for §125 benefits do not decrease wages
subject to withholding. If the employer gives the employee an
amount to take as cash or to spend on benefits, the entire amount
is taxable, whether taken in cash or spent on benefits. Exception
to either case: if the employer requires a minimum amount of
coverage, employee expenditure for this will decrease taxable
wages.
2.
Non-taxable if
used for coverage for hospitalization, sickness, disability,
death, supplemental unemployment benefits, or strike benefits.
3.
Moving expenses
are exempt from withholding if within the categories of (a)
transportation of household goods and effects and (b) travel,
including lodging and meals, to the new residence, if: (1)
expenses equal or exceed reimbursement; (2) the move is from one
official work station to another official work station of the same
employer; (3) the move is at the request or direction of the
employer; and (41) the new workplace is at least 50 miles further
away from the employee's residence than the old workplace was
located. All moving expense reimbursements are to be included as
state wages, and all but thc above are subject to withholding.
Expenses meeting the above requirements are to be claimed as a
deduction on the employee's Schedule UE when filing the personal
income tax return, so as to avoid taxability.
4.
Excludable if it
meets NJ definition of job related:
i.
Must not be a
minimum requirement for employment
ii.
Must (at least
one of the below):
1.
Maintain or
improve skills required by the employee is his/her trade,
business, or employment,
2.
Meet the express
requirements of the employer (other than as in "a." above), or
3.
Meet the
requirements of applicable law or regulations imposed as a
condition of the retention of the employee's salary status or
employment.
5.
NJ disregards
federal exclusion, but has its own wage exclusion for amounts paid
to employees specifically for using alternative means of commuting
(such as public transportation, carpools, or vanpools). Employee
expenses must be substantiated. Employer may give up to $1,105
(1998 amount; 1999 amount will be announced in the fall), may
excluded it from NJ taxable wages, and must report it in W-2 box
14.
6.
Excludable if the
property or service is owned or under lease by the employer (such
as a company-owned parking lot or a company-owned van used to
pick up employees and bring them to the office. Transit benefits
are taxable.)
Massachusetts
·
Wages and
benefits subject to withholding: follows the current federal
Internal Revenue Code
·
Wages and
benefits that must be included in wages reported to state: follows
IRC of 1/I/98 (used to be IRC as of 1/1/88; Technical Information
Releases 98-8 and 98-15)
So, for 1999, all
wages and benefits are reported to Massachusetts and subject to
Massachusetts withholding to the same extent that they are
reported and subject to withholding for federal purposes, EXCEPT:
VANPOOLING AND TRANSIT PASS BENEFITS. Transit passes or vanpooling
benefits may be given out (or the employer may reimburse actual
documented expenses) up to a combined monthly maximum of $65, and
this will not be subject to wage inclusion or withholding for
either federal or Massachusetts purposes. However, if the employer
gives the employee a choice between receiving the benefit or
unsubstantiated cash, the value of the choice, while not subject
to Massachusetts withholding must be reported as Massachusetts
wages.
This is because
the federal Transportation Equity Act (which made the "choice"
described above exempt from federal wage inclusion or withholding)
was signed on 6/6/98, after the "IRC 1/1/98" date that
Massachusetts chose to follow for purposes of wage inclusion. This
same discrepancy will occur if there are any other federal
changes.
|
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