Payroll taxes: Federal, state and local, oh my!

By John Stauffer, Ceridian vice president of Tax and Trust Product Management

The ever-changing and complicated issues that are part of the tax filing process can be challenging. But, unfortunately, it's probably going to become more complex. The federal and local governments will continue to change and update tax codes and enact strict reporting guidelines for companies of all sizes. One of the most common issues companies may face is what to do and what to consider when paying employees in more than one state.

For employers, maintaining the compliance requirements for all of the different tax jurisdictions is a challenge -- with the failure of noncompliance resulting in penalty and interest charges. Keep the following points in mind:

• When it comes to staying compliant with the tax jurisdictions, change is inevitable. You must keep up with the changes, however, and use the correct deposit forms and payment types -- paper and electronic.
• Filing rules change quarterly, and annual returns requirements dictate that data is to be supplied in the correct format based on the employers' profile. Requirements can change from paper to electronic formats based on the number of employees.
• Electronic format changes mean the employer must ensure their payroll system can output the data in the correct format and media. Unfortunately, required changes from tax jurisdictions typically only become available late in the year, resulting in a last-minute "fire drill" for every employer.
• As companies grow, they often move into new states, meaning they now have another state's compliance rules to maintain and add to their payroll processes. When this occurs, make sure you have all the filing requirements for that new tax jurisdiction.
• Double check that your employees are being taxed in the correct tax jurisdictions -- the correct combination of jurisdictions are dependent on the employee's place of work and residence.

Staying current and compliant with your tax filing processes, whether you are in one state or 20 states, can be scary and costly if it's not managed right. But with a little foresight and diligence, problems and unexpected costs can be avoided.

If you'd like to learn more about Ceridian's Tax Services, contact your Ceridian representative.