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Payroll Taxes for Remote Employees: Everything You Need to Know

Whether your business is growing or you need to alter your work environment during trying times like the coronavirus pandemic, payroll taxes for remote employees is a potential hurdle your business may encounter. Keeping track of your remote employees for payroll reporting can be somewhat confusing, especially as your remote team expands. 

Understand that payroll taxes for remote employees come with complications from income tax withholding to the working relationship you have with your employees. 

Explore how your payroll for remote employees can be greatly simplified with a professional employer organization like Canal HR. 

A pen on payroll taxes for remote employees

Payroll Taxes for Remote Employees

There are many considerations that are required when preparing your payroll taxes for remote employees. 

Remote employees are often required to pay state taxes in which work is performed. Often times, employers are required to pay taxes on wages paid to these employees, even if the employer doesn’t have a physical location in that state. 

The general rule of thumb is that you should pay state taxes in the state where your remote employee works. By withholding state taxes this way, you will better comply with the everchanging IRS regulations. 

How you pay your remote employees is another important consideration. This is determined by how your employee is classified. There are two types of remote employees and each type has different federal and state requirements that you must comply with.

Types of Remote Employees

The type of work relationship that you have with your remote employees plays a significant role in the tax liabilities that you both will have. 

Depending on the type of remote employee you have, you will have to withhold or pay certain state and federal taxes. 

Employees

When you hire a remote employee, you’re responsible for paying a portion of their payroll taxes and withholding payroll taxes from their paychecks. As mentioned earlier, you should generally pay state taxes where your employee works. 

So if your remote employee lives and works entirely in Texas, but your business is located in Louisiana, you will withhold income taxes according to Texas law and paid to Texas state. However, if your employee works in multiple states, taxes must be withheld and paid for each of those states.

Independent Contractors

Payroll for an independent contractor is more manageable since you’re not responsible for withholding taxes from their pay. The contractor is the responsible party for handling their own state taxes. 

Be careful when classifying your workforce as contractors. Misclassifying an employee as an independent contractor can impose serious tax penalties on your company from the IRS. 

Payroll Taxes for Remote Employees with a PEO

Although hiring remote employees or implementing remote work can lead to payroll complications, the potential business benefits are significant. With the help of a professional employer organization, you can better manage your payroll taxes for remote employees and contractors. 

Canal HR can help you comply with the state in which your remote employees work and their tax laws in order for you to administer your payroll taxes appropriately. When you outsource your payroll, the complex work you once handled is now in the hands of industry professionals. 

We take the utmost care of your payroll taxes for all employees, as the intricate details can cause serious impediments to your business if not administered properly. Our team at Canal HR has an in-depth understanding of state and federal tax laws, ensuring that you remain compliant with all regulations. 

Take the stress out of payroll taxes and see how Canal HR can simplify your payroll preparation

Get Your Payroll Taxes for Remote Employees Done at Canal HR

If you’re ready for high-quality service that brings you peace of mind with your payroll taxes for remote employees, our team at Canal HR is here to help. 

Managing payroll taxes for remote employees requires effort and planning, leave it to Canal HR to complete your payroll paperwork and eliminate your compliance anxiety with state and federal tax mandates. 

At Canal HR, we reduce your liability costs with our team of experts who protect you from payroll oversights. The smallest overlooked detail can lead to bigger issues with the IRS at the end of the year. 

When you outsource your payroll administration to Canal HR, our payroll professionals will work in conjunction with your other departments like employee benefits to give you access to extensive knowledge of payroll and tax compliance. 

Take the stress out of payroll taxes for remote employees and contact us today for a free consultation.