Employee works in one state, but lives in another. Why is it necessary to open payroll tax accounts in state where employee lives?

nadneiny-gmail-c · ‎July 26, 2021

My company is opened in Illinois and I am only one employee there. My home address is Alabama, I live there, but don't earn any income in Alabama. Also, I don't work remotely. QB insisted to open a Withholding tax account and UI account in Alabama and took $ 12 /month fee for multistate. And now is time for quarterly reports and Alabama Departments don't accept reports with Zero. I called and wrote in Alabama departments and they answered: If I don't earn income in Alabama they have to close all accounts, and they did it. Why does QB have such requirements? Are any official resources about Withholding and UI taxes in both states, where an employee lives, and where he/she works?

Thank you

Giovann_G · ‎July 26, 2021

Hello there, nadneiny-gmail-c.

I can imagine how much savings you have when you get rid of the multi-state fee in QuickBooks Online. I'm here to help you remove this charge.

First, let's make sure that the information shown on the W4 form is correct. If you already changed to Illinois(IL), please return it to the Alabama(AL) address. This way, you'll have the right address appear on your employee's W4 form. Then, you can set up the second state(Alabama) to " Do Not Withhold" so no taxes are withheld on this state. I'll show you how.

Go to the Payroll menu, then select Employees.
Click the employee's name.
Choose the Edit employee.
In the section What are employee's withholdings?, select Edit.
In the section for the secondary state, choose Do Not Withhold from the Filing status drop-down, and zero out Additional amount.
Hit Done.

Once done, you can contact our QuickBooks Payroll Team to opt-out of the multi-state fee. They'll be able to pull up your account and request for removing the charges.

In addition, you can review this article for more insight about the W4 form: What’s changing with the Federal W-4?

I'll be right here if you have further questions about payroll taxes. Feel free to leave a comment below, and I'll get back to help you.

View solution in original post

Angelyn_T · ‎July 26, 2021

Hi there, @nadneiny-gmail-c. I'm here to share with you some information about multi-state payroll situations in QuickBooks Online (QBO).

QBO is only dependent on state and IRS regulations. Usually, payroll taxes such as state and local withholdings are based on the employee's residence and work location. These taxes are calculated and reported differently depending on the laws of the particular states where your employee lives and works.

For the time being, I would recommend contacting your state agency so they can discuss this further for you.

Some states have reciprocity agreements. To find out whether there is a reciprocity agreement between your employee's work location state and residence state, you can check out this article: About multistate employment payroll situations

In case you need help with updating a work location in QBO, you can open this link: Changing a primary state.

If you have any other payroll questions, please let me know by adding a comment below. I'm more than happy to help. Have a good one!

nadneiny-gmail-c · ‎July 26, 2021

Thank you. Today I wrote to the Alabama Department of Labor about my UI tax and I got the answer:

Based on this information, the aforementioned account will be cancelled. Please be aware that Alabama is a liability state and you must first pay wages to employees physically working in the state before applying. Feel free to reapply once you have paid wages.
(I can attach email)

Also, today I called to Alabama Department of Revenue to ask about my Withholding tax and got approximately the same answer. If I don't earn any income in Alabama I have to close my Alabama Withholding tax account.

After all, I wrote to Customer Support and explained my situation, asking to remove Alabama from tax payments, reports, and an additional $12 fee. The customer assistant recommended me to change the employee's home address from AL to IL. I did it, but it isn't correct. Automatically address was changed in W4 form, and I am afraid the wrong address can be in other tax reports.

-------

Based on your links I found that Alabama is one of states that do not withhold from residents who work in a state that has withholding.

(I attached the file, based on your link).

In conclusion, QB insists to have a withholding account in AL if it's only an employee's home address, but it shouldn't. Is it a bug?

I really want that all will be correct

Thank you.

Giovann_G · ‎July 26, 2021

Hello there, nadneiny-gmail-c.

I can imagine how much savings you have when you get rid of the multi-state fee in QuickBooks Online. I'm here to help you remove this charge.

First, let's make sure that the information shown on the W4 form is correct. If you already changed to Illinois(IL), please return it to the Alabama(AL) address. This way, you'll have the right address appear on your employee's W4 form. Then, you can set up the second state(Alabama) to " Do Not Withhold" so no taxes are withheld on this state. I'll show you how.

Go to the Payroll menu, then select Employees.
Click the employee's name.
Choose the Edit employee.
In the section What are employee's withholdings?, select Edit.
In the section for the secondary state, choose Do Not Withhold from the Filing status drop-down, and zero out Additional amount.
Hit Done.

Once done, you can contact our QuickBooks Payroll Team to opt-out of the multi-state fee. They'll be able to pull up your account and request for removing the charges.

In addition, you can review this article for more insight about the W4 form: What’s changing with the Federal W-4?

I'll be right here if you have further questions about payroll taxes. Feel free to leave a comment below, and I'll get back to help you.

nadneiny-gmail-c · ‎July 27, 2021

Thank you, I appreciate your help.

I did all that was recommended, but Customer Service couldn't solve my issue online and asked me to wait for 48 hours.

I'll write when the problem is solved.

Thank you

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Employee works in one state, but lives in another. Why is it necessary to open payroll tax accounts in state where employee lives?