August 27, 2020Payroll & Tax Support, Year-End Payroll Planning
Tax Jurisdiction Registration – A Necessary Evil
With year-end approaching (hello, September!) in a year that has been riddled with irregularities, getting ducks lined up is imperative. This includes completing vital tasks such as tax jurisdiction registration. It’s not always fast or easy, but you can’t complete W-2’s without those pesky withholding account numbers. Here, the Wise tax team shares some things to keep in mind if you want to avoid having to file W-2c’s or being penalized for delayed filings.
Tax Jurisdiction Registration Basics
Every Federal Employee Identification Number (FEIN) needs to have its own unemployment and withholding account numbers in every jurisdiction where that FEIN has a presence. An FEIN is an identifying number a legal entity uses to file with the IRS. Each separate legal entity is required to have a unique FEIN. Each FEIN needs both a withholding and an unemployment account number for every state where workers have established a presence. For example, if your company has five subsidiaries in one state (each having its own FEIN), each of those five need their own unemployment and withholding account numbers.
Tax Jurisdiction Rules Vary by State and, Sometimes, Municipality
The rules are different for each state and, in a handful of states, each municipality requires its own withholding ID. It can be frustrating, inconvenient and time-consuming to research all the rules, acquire the information needed for each application and jump through all the hoops. Plus, some states charge a fee for these account numbers.
Since an organization cannot file or sometimes even deposit taxes until they have been issued account numbers, it can affect the bottom line. If you are using a payroll vendor, and at the end of the quarter changes have occurred, such as:
- the recent hire of an employee in a jurisdiction in which unemployment and withholding accounts are not already held,
- a current employee changing their state of residence, or
- your company acquiring a new company in a jurisdiction the parent company has no presence in,
you have to supply these vital account numbers to the vendor to keep things ticking along correctly. Failing to supply the numbers in a timely fashion can result in being billed and required to complete an amended return once you do have the account numbers in-hand.
Applying for Unemployment and Withholding Account Numbers is not Always Straightforward
States have differing application processes for obtaining these critical account numbers. Some have online application capability and will issue you the account numbers you need immediately. Others require that you print out the application, complete required information such as the date of the company’s incorporation, an officer’s Social Security Number or even a copy of their driver’s license, get it signed by officers of your company and then mail the application in.
Chasing Down your Unemployment and Withholding Account Numbers
Following up is required of each application method that does not immediately produce account numbers. As we creep toward year-end, reaching out to tax jurisdiction entities for an update about individual applications is likely to become more frantic. It is important to begin this process sooner rather than later because there is no timeline within which entities are required to issue applicants their account numbers. Check out our article about year-end 2020 here.
A Word About COVID-19 Teleworker Taxation
Employers face a unique concern this year as businesses operate with more remote workers than ever before. Normally, a remote worker’s taxes would be tied to their home state. However, several states have indicated they will not assert nexus (business presence) for newly remote workers who have been displaced from their workplace “temporarily.” Since there is no assurance that all states will declare the same exception to the rules, this is an area to watch. In addition to managing jurisdictional position on teleworker taxation requirements, some employers are choosing to continue remote work into the indefinite future. In these cases, the battle will be to ensure that the now-permanent remote workers get their taxes set up properly—meaning new registrations could be required.
Getting Help with Tax Jurisdiction Registration
Wise tax experts can lift the burden of tackling this disjointed process. Contact us to start a discussion about how we can help you obtain the critical account numbers you need to file taxes and avoid the need to complete W-2c’s or suffer penalties on delayed filings. Email HCMHelp@WiseConsulting.com or call 800-654-4550 today.
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