Payroll Taxes - out of state
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3 Posts
I have an employee who turned in a change of address form changing her address from Lexington Kentucky to Columbus Ohio. Clearly she does not commute from Columbus (3-4 drive) and told us that she did this because her mom claims the employee on mom's tax returns. Previously, her mom lived in Illinois and we were told that Illinois made the employee pay Illinois state taxes even though she lives and works in Kentucky. I believe mom claims the employee on the mom's tax returns because the employee is a student. I do not understand the reasoning for this and am hoping that someone can help me. It does not seem right that another state can make you pay taxes when you do not live or work in that state. If I change the address, then our local taxes miss out because we have a local city tax and a local school tax. Help?????
Comments
OK, let me preface this by saying I'm not a payroll expert.
But we ALWAYS withhold based on the state work is performed in. If they "reside" in another state then they can file for a refund at the end of the year. Now, I don't know about KY, but maybe they have an "exempt" status for those that live in OH, but she would still have to complete the KY withholding form.
Right?
That is not always the case. For example, I work in MD. We have employees that live in MD, DC, and VA (as do many of the employers in this area). All three states have a reciprocity agreement that you take taxes out from the state the employee LIVES, as that is where they are paying & filing taxes. So, if OH and KY have this agreement then you would take out taxes from the state in which the person lived (in this case Ohio).
As far as computing the taxes, if you have a 3rd party vendor then they can do this for you. If you do this yourself then I would contact your accountant to help you do this.
It is my understanding that most of the states that have lots workers crossing borders have these agreements. If you are an employer close to the state line and have employees in multiple states then I would find out what taxes you are supposed to take out.
In Kentucky, a nonresident employee is not subject to state income tas withholding when the employee is a resident of a state having a reciprocal exemption agreement with Kentucky. Kentucky has reciprical agreements with Illinois, Indiana, Michigan, Ohio, West Virginia, and Wisconsin. Employees, however, must file a certificate of nonresidence, Form 42A809, to obtain this exemption.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />