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Set up employees and payroll items

Set up multi-state withholding

Follow these steps to manage state income tax (SIT) withholding for employees living in a different state than their work location.

For the employer

  1. Go to the
    Clients
     screen and select the
    Payroll Taxes
     tab.
  2. Mark the
    Client has nexus in this state
     checkbox for the business location.
  3. Add the employee's home state:
    1. Select the state from the dropdown.
    2. Mark the
      Client has nexus in this state
       checkbox if registered to pay taxes there.
  4. Select
    Enter
     to save.

For the employee

  1. Select
    Setup
    , then
    Employees
    .
  2. Find the out-of-state employee.
  3. Select the
    Payroll Taxes
     tab.
  4. Select the employee's home state in the State Withholding section.
  5. Add the work state:
    1. Select the employer state from the
      State
       dropdown.
    2. Mark the
      Nonresident exemption certificate
       checkbox if the employee has submitted a nonresident exemption certificate.
  6. Select
    Enter
     to save.

Determine state withholding

Answer these questions:
  1. Is there a reciprocal agreement between states?
  2. Does the employer have nexus in the employee's home state?
  3. Has the employee filed a nonresident exemption certificate?
  4. Does the home state tax out-of-state work?
  5. Does the work state tax non-residents?
  6. Is there a tax credit between states?
  7. Is home state withholding required if the work state has none?
  8. Does the work state have withholding?
Based on your answers, use the following table to determine the correct withholding setup. This ensures you're complying with both states' tax laws and treating your employees fairly.
1
2
3
4
5
6
7
8
Answer
Yes
Yes
Yes
-
-
-
-
-
Withholding held on resident state, and nonresident state equals zero.
Yes
Yes
No
-
-
-
-
-
Withholding held on the nonresident state.
Yes
No
Yes
-
-
-
-
-
No withholding held on either state.
Yes
No
No
-
-
-
-
-
Withholding held on the nonresident state.
No
Yes
-
Yes
Yes
Yes
-
-
Withholding held in full for the nonresident state. Any withholding differences are accounted for in the resident state.
No
Yes
-
Yes
Yes
No
-
-
Full withholding held in both states.
No
Yes
-
Yes
No
-
-
-
Withholding held on the resident state.
No
Yes
-
No
Yes
-
Yes
Yes
Withholding held on the nonresident state.
No
Yes
-
No
-
-
Yes
No
Withholding held on the resident state.
No
Yes
-
No
No
-
Yes
Yes
Withholding held on the resident state.
No
Yes
-
No
-
-
No
-
Withholding held on the nonresident state.
No
No
-
-
No
-
-
-
No withholding held on either state.
No
No
-
-
Yes
-
-
-
Withholding held on the nonresident state.

This article applies to:

  • Product: Accounting CS
  • Subject: Payroll checks, Setup
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