Tax Compliance new!
Getting started with payroll tax compliance as a payroll or HR provider can be tricky, but essential. Build your product with confidence with Symmetry.
Reciprocity is an agreement between two states that allows residents of one state to request exemption from tax withholding in the other (reciprocal) state.
First, a little background information: Almost every single state that imposes a personal income tax requires that the tax be paid on all income earned in the state, including income earned by nonresidents. nonresidents generally have to pay this income tax by filing a nonresident income tax return with the state, and a regular annual tax return for all income earned (if any) in the state in which they live. These tax returns include all income earned, regardless of where it was earned. Usually, residents can take a credit on the return for their state of residence for taxes paid to other states.
As you can imagine, this is not ideal for taxpayers to have a double burden. To combat this, many states have entered into state tax reciprocal agreements. “Reciprocity” is usually used in terms of this type of agreement, which allows residents of one state to request exemption from tax withholding in another state. A reciprocal agreement is made between two states’ governments.
The combination of nexus and reciprocity helps employers determine whether or not to withhold taxes from employees’ paychecks. If an employer does not have nexus with an employee’s state of residence, but there is a reciprocal agreement between the two states, then the employer must honor the reciprocity agreement and not withhold income tax for the state where the employee works. However, the employer is not obligated to withhold income tax for the state where the employee lives because the employer does not have nexus with the resident state (the employee in this scenario would have to make estimated tax payments.)
Getting started with payroll tax compliance as a payroll or HR provider can be tricky, but essential. Build your product with confidence with Symmetry.
Fringe benefits are a type of compensation a company may offer to an employee or person performing services for the company and are often used to recruit top job candidates and motivate employees.
Geocoding is useful for a multitude of different applications, and especially important in payroll for determining the precise taxes that apply to individual employees.
Local taxes are income taxes imposed by local governments. Separate from federal and state income tax, local taxes generally are imposed on people who live or work in the locality.
Multi-state payroll refers to when an employee lives in one state but works in another and additional considerations must be considered when determining taxes.