Payroll compliance is a detailed process focusing on local and state payroll laws. With a rise in remote workers nationwide, business owners must understand and comply with different states’ payroll laws, and multi-state compliance is critical for business owners.
What is Multi-State Payroll Compliance?
Payroll compliance is mandatory for all employers, and this compliance is state-specific but also overseen on a federal level. Compliance involves a wide range of aspects, including but not limited to paying employees, reporting earnings, and payroll taxes.
While some payroll laws are state-specific, the Internal Revenue Service (IRS), Department of Labor (DOL), and the Fair Labor Standards Act (FLSA) oversee payroll activities within the states. In addition, employers must comply with state-specific laws and federal laws.
Multi-state payroll applies to employers who have employees who work in a different state or across multiple states. Remote workers are more common today than ever before, and projections show that 36.2 million American employees will work remotely by 2025.
Tax Compliance Across Multiple States
Tax withholdings are an essential part of payroll compliance on the state and federal levels. The IRS and local taxing authorities monitor taxes withheld and paid by employers and employees. With an increase in multi-state employees, businesses must be compliant in the state where their company is established and in every state where an employee may reside and work.
The American Payroll Association states,
“As a starting point, the default rule of state income tax withholding is to withhold income tax for the state where services are performed (the work state). Almost all states require employers to withhold tax from employee wages earned for work performed in that state, even for non-residents.”
Small Businesses Need Help With Payroll Compliance
Small business owners need payroll companies for small businesses to help with local payroll compliance and multi-state compliance. There are layers of laws and compliance issues to understand and apply, and non-compliance can lead to financial penalties, audits, or the dissolution of a company.
Don’t let payroll compliance become an issue for your small business. Brabo Payroll is here to help you maintain multi-state payroll compliance. Brabo Payroll is a local payroll company serving small businesses in Massachusetts, offering payroll service solutions specializing in local small businesses.
Contact Brabo Payroll to make an appointment online or call 617-420-8677.