Multi-State Nexus & Reciprocity Flashcards

An employee moves from State A to State B mid-year. Which state's rules govern withholding for wages earned after the move?

Answer: State B for wages earned after the move, State A for wages before

Withholding follows the employee's current circumstances; wages earned after the move are subject to State B's rules, while pre-move wages follow State A's rules.

Which of the following pairs of states does NOT have a reciprocity agreement with each other (as of current law)?

Answer: California and Nevada

California does not participate in any reciprocity agreements, so California-Nevada workers must deal with each state's separate withholding and filing requirements.

A company sends an employee to work at a client site in another state for 60 days. The employer is concerned about SUI (state unemployment insurance) liability. SUI is generally owed to:

Answer: The state where the employee's base of operations is located or where the employee's services are directed from

FUTA's localization rules assign SUI to one state using a four-part test: localization, base of operations, direction/control, then domicile.

The FUTA four-factor test for multi-state employees applies in which order?

Answer: Localization → base of operations → direction and control → domicile

FUTA regulations apply the factors in order: first check if services are localized in one state, then base of operations, then direction/control, then domicile.

An employee works in three states during the year. For state income tax withholding, the employer must generally:

Answer: Register and withhold in each state where services are performed

Each state where an employee performs services generally requires the employer to register for withholding and remit taxes for wages earned in that state.

Which statement correctly describes a 'credit for taxes paid to another state' as it relates to payroll?

Answer: Employees may claim a credit on their resident state return for income taxes paid to another work state

Most states allow resident taxpayers to claim a credit on their resident return for income taxes properly paid to a non-resident work state, preventing true double taxation.

A payroll manager discovers an employee has been working remotely from a state where the company is not registered. The most immediate compliance step is to:

Answer: Register with the new state's taxing authorities and begin withholding retroactively if required

The employer must register in the state for withholding (and often SUI) and determine any back-withholding obligations from when nexus was established.