You would be surprised how many household employers find themselves in a “multistate” payroll and tax situation.  Metro areas easily cross state borders. Lake Tahoe crosses California and Nevada state lines.  A nanny in New Jersey could work in New York City.  Or a caregiver in Maryland might work for an employer in Washington D.C.

Multistate payroll for household employers gets complicated when your nanny works in more than one state or lives in a different state than you. Here’s a breakdown of the key factors:  

Where the Work is Performed:

Primary Work Location:Generally, you’ll withhold and pay state taxes (income tax, unemployment tax, etc.) in the state where your nanny primarily performs their work. If they mainly work at your home in State A, that’s the primary state, even if they occasionally travel with you to State B.

Temporary Work in Another State: If your nanny travels with you for a short period (e.g., a family vacation), you might not need to withhold taxes for the other state, especially if it’s considered temporary. However, the definition of “temporary” varies by state, so it’s essential to check the specific rules.

Nanny’s State of Residence:

Living in a Different State:If your nanny lives in State B but works in your home in State A, you’ll likely need to withhold taxes for State A (where they work). However, some states have reciprocal agreements that might affect this, so it’s crucial to investigate.

State Tax Withholding and Reporting:

State Income Tax: You’ll need to withhold state income tax for the state where your nanny works, and potentially their state of residence if required.

State Unemployment Tax: You’ll also need to pay state unemployment tax in the state where your nanny works.

Other State Taxes: Some states have additional taxes like state disability insurance (SDI) or family leave insurance, which you might need to withhold and pay.

Filing Requirements: You’ll need to file the necessary state tax forms and reports in each state where you have tax obligations.

Complexity and Solutions:

Increased Complexity: Multistate payroll significantly increases the complexity of your household payroll. You’ll need to understand the tax laws and regulations of multiple states, which can be challenging.

Here’s an example:

You live in New Jersey, and your nanny works at your home there. However, she lives in Pennsylvania. In this case, you’ll likely need to:

Withhold New Jersey state income tax.

Pay New Jersey state unemployment tax.

Potentially withhold Pennsylvania state income tax (depending on any reciprocal agreements).

Key Takeaways:

Multistate household payroll requires careful attention to the tax laws of each state involved.  

It’s crucial to determine where the work is performed and the nanny’s state of residence.

Most Importantly, selecting your Payroll Service! Using a skilled, established household payroll service is highly recommended in multistate situations. Do you know that not every big household payroll service offers multistate payroll?  They may not even make that clear upfront.  And some payroll services charge extra for multistate because of the extra work involved.  But not Savvy Nanny Payroll Services.  Savvy Nanny clients enjoy multistate service at the same price as single state. Sign up for service at https://savvynannypayrollservices.com/signup/.