June 16, 2021 | Payroll Software | Posted by Clark Sells, Group Product Manager at Ascentis
Why Multi-jurisdictional Payroll Services Make Sense for your Business
The old saying claims that "all business is local." While that certainly holds true in many contexts, it's also true that today's business environment covers more physical ground than ever before. As businesses expand their operations and technology makes it easier to employ workers in multiple locations, employers have had to become more adept at managing a variety of rules and regulations across a number of jurisdictions. Let's take a look at a few key statistics that drive home that idea.
- Nearly 5,000 cities spanning 17 states have some kind of city-specific tax
- Many counties also impose local income taxes, including all 190 counties in Indiana, all 42 counties in Maryland, and 73 counties in Kentucky
- Some states impose taxes based on school districts, including 472 districts in Pennsylvania, 279 in Iowa, and 200 in Ohio
- New York and Oregon both apply a transportation-based local income tax
Making things even more complicated, some states also offer tax reciprocity for businesses with employees in nearby or neighboring jurisdictions. In that situation, employees earning a wage in more than one tax jurisdiction need to have their taxes calculated, withheld, and reported to each jurisdiction individually. Without a system that recognizes those reciprocity rules, it becomes all too easy to make mistakes in tax withholdings.
Those border-spanning requirements are exactly why Ascentis offers multi-jurisdictional payroll services. To stay compliant, organizations with employees in multiple locations need to manage payroll according to the rules of wherever their workers are actually working. Ascentis Payroll is designed to calculate, withhold, and report all required state and local taxes regardless of how many tax jurisdictions an employee works in over the course of a pay period.
That wide range of tax regulations can create some complicated scenarios for an HR and payroll team. Let’s say an Ohio-based company called Acme Industries has facilities in both Dayton and Columbus. Maria is an Acme employee based in Dayton who also sometimes picks up shifts at the Columbus facility. The Ascentis Payroll system automatically recognizes that Dayton imposes a 2.25% city tax rate, while the rate in Columbus is 2.5% and applies those rates to the respective hours Maria works in each location. Ascentis Payroll uses embedded logic to ensure that those calculations are correct, eliminating the need for Acme’s payroll team to manually adjust tax jurisdictions on Maria’s records.
Ascentis Payroll also helps employers manage multi-jurisdictional taxes by ensuring that:
- All state and local taxes are detailed on a single employee pay statement
- Details of multiple tax rates are available in the system’s payroll audit report
- All taxes are remitted to each jurisdiction in compliance with each individual filing deadline
- All reciprocity rules are respected, applying the applicable tax rate based on an employee’s work/live state combination
- All applicable taxation jurisdictions are displayed within the journalizing process
Maybe it is true that all business is local, but “local” means different things in different places. By entrusting your online payroll services to Ascentis, multi-jurisdictional businesses can help ensure that they stay compliant with income tax laws no matter where their employees are doing their work.
Clark leads the Payroll, Tax, and Mobile product teams at Ascentis. In this role he is responsible for leading the payroll compliance product development life cycle. Clark has experience in building, implementing and maintaining payroll and tax software for employers and payers of all volumes. In addition to payroll, Mr. Sells has product strategy experience in multiple tax regimes including: 1099, FATCA, CRS and ACA. He is a subject matter expert in the area of taxpayer identification number matching, non-wage and state reporting. He is a former chair of the IRPAC’s Employer Information Reporting and Burden Reduction Committee (EIRBR) and former member of the Internal Revenue Service Advisory Committee (IRSAC). Previously in his career he held product management roles at Ceridian, where he focused on the creation of the on-demand payment platforms, an industry principal role at Sovos Compliance, and has worked in various global treasury services roles within Bank of America and Ameriprise Financial.