Blog: Payroll

Reciprocity is the one multi-state payroll rule that clients think is automatic. It is not, and the gap between what it does and what employers assume it does causes most of the errors in this area.

Three sentences to get right at the outset:

It applies only between specific state pairs that have agreed to it. Not generally, not by default.

It requires a certificate from the employee. Without one on file, the employer withholds ...

Certified payroll is one of the few payroll areas where a reporting error carries criminal exposure, and contractors treat it as a weekly form to submit. That mismatch is the reason this work generates the findings it does.

For a CPA advising a contractor, the useful contribution is narrow and valuable: establishing which regime applies, getting the classification and fringe computations right, and being clear about who certifies what.

First, Establish Which

The risk in January is not that rates changed. Everybody knows rates change.

The risk is that a dozen separate items change at once, in different systems, and responsibility for them is split — some maintained by the payroll provider and some by the employer. The failure mode is a client who assumes the provider handles all of it, and a practitioner who assumes the client checked.

So the useful thing this post can do is divide the list by who has to

Remote work broke an assumption payroll systems were built on: that the state where an employee works is the state where the employer's office is.

Once that assumption fails, one employee can generate obligations in two or three states, in a city nobody registered with, and — the part that surprises clients most — can create tax and registration obligations for the employer that have nothing to do with payroll at all.

The way to get this right is to stop ...