When you have plans to expand your business into multiple states, it’s always a reason to celebrate. When that expansion includes hiring new employees in the new location, there are a few payroll tax considerations to think about. Here’s what you need to know about multi-state payroll taxes.
As soon as you start paying employees in multiple states, your business must file an income tax return in that state. So the decision to hire even just one employee in a new state has tax implications. As an S-Corp, you also have to file a personal income tax return in the new state. Since this becomes a factor in your expansion, it should also be a consideration when choosing the states in which you wish to operate.
Understanding taxes for each state helps you make a strategic move that improves your profit margins. It’s best to delve into the tax implications of the states on your radar, and ensure you set your prices high enough to cover the taxes in order to enjoy a healthy profit margin. Also, since the S-Corp flows through to the S-Corp owners, your business will need to file a return in that state, as well.
The trick is ensuring you can cover all costs, including taxes, and still see healthy profits. Keep in mind depending on the state, you might face other requirements you don’t expect for payroll purposes. Your best bet is partnering with an experienced payroll small business multi-state accounting expert.
Although expansion itself is a sign of success, being strategic in your expansion will help ensure you continue to enjoy your success. Set goals, so you can focus on the specific elements of expansion to help achieve those goals. Do you want to expand your reach, or increase your sales? Will you simply open up your advertising to reach a wider audience in other states or do you actually want to hire people in other states? Do you want to take advantage of selling to other multi-state companies? All of these possibilities can contribute to your success, while also influencing the states that make the most sense for your goals.
If you’re buried in work from expanding into another state and accidentally miss tax deadlines, you can redeem yourself. If you receive notice about late taxes, several states provide amnesty periods that apply to sales and income tax. These free periods help companies catch up when they get behind on their taxes. If this happens to you, it’s not the end of the world. You just need to find a small business CPA experienced in multi-state income and payroll tax to help you navigate the setback. Accountants for small businesses in multiple states will help you avoid any issues and get your company back on track.
Find the right business accounting partner to ensure you’re set up correctly and are making the most out of your expansion into another state. Partner with the multi-state tax experts at Tolbert CPA.