On April 29, the American Payroll Association testified in Congress in favor of proposed federal legislation. The bill is H.R. 1129, also known as the Mobile Workforce State Income Tax Simplification Act.
Lori Brown, CPP, testified on behalf of the APA. Brown is an APA member with more than 20 years experience dealing with multi-state employers. She explained how temporary out-of-state work assignments create burdens on employers and employees. Employers must register and withhold tax for each state in which employees may work regardless of how short that time may be.
Currently, state tax and withholding obligations for nonresident employees vary. Withholding can be based on the amount earned in the state, time spent working in the state, or a combination of the two. With such variations multistate companies find compliance nearly impossible.
The proposed bill would provide a uniform standard for nonresident employee taxation. Nonresident employees would have to work 30 days or more in a state before the state could tax their wages. This 30-day threshold would not be continuous. Once reached, tax and withholding would go back to first day worked in state. This promotes increased compliance through decreased burden.
Check your inbox for PayState Update, Issue 11 for more on the proposed legislation.