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Dealing with Multi-State Payroll By: Tara Peebles, CPA, QuickBooks ProAdvisor Product: QuickBooks Payroll Tip Category: Workaround

Situation

You are working for a client with one or more employees with wages in two different states. You are looking for a way to set them up for payroll in QuickBooks 2007.

Response

While it's true QuickBooks 2007 (and earlier versions) doesn't have a programmed way for you to handle the chore, you can create payroll items for the pay in each state, although it could require manual steps.

(Note: I strongly advise against a first impulse to create a duplicate employee for each state. This screws up the FUTA calculations. The solution following may require manual adjustments as to SUTA, but I see this as preferable.)

1. Set Up. Within a single employee record, you can make payroll items taxable only to specific states.
2. Research. Check each state's rules concerning SUTA. In my client's situation, the entire pay was covered under SUTA for the state where the employee and employer both resided.
3. Manual Effort. Do a test run to confirm, but in most cases QuickBooks, not programmed for multiple states, will calculate the state withholdings incorrectly. My client that used the above approach had to manually calculate the state withholdings for all affected paychecks.

We thank Tara for letting us share this useful tip. The Payroll Group is publishing a related Master Tip, with detailed step-by-step instructions. Master Tip: Working with Multi-State Employers

Tara Peebles, CPA, QuickBooks ProAdvisor
Peebles CPA PC
Fuquay Varina, North Carolina

Last Updated: 05/03/2007

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