State Calculation of Taxable Wages with Credit for Earnings from Other States
Study and Recommendations for State Workforce Agencies
In recent years, improved computer systems enable states to calculate taxable wage totals for most employers. For employers that interact directly with a state website to report quarterly wages, the taxable wage calculation feature is helpful. However, for large multistate employers that file electronically, several real-world conditions may cause discrepancies between state and employer taxable wage totals; notably employees who transfer across state lines. Identifying such discrepancies and requesting substantiation from employers will create potentially unproductive workload for the state and employers.
This study was intended to highlight a growing problem associated with this new technology, which is that many of the states that have built new systems to calculate taxable wages have done so in many different ways, some of which are quite costly for the state and employers. This diversity led NPRC to propose a workgroup of private sector industry leaders and governmental UI tax officials to examine the issues and propose recommendations to states contemplating new UI tax e-filing systems.
State system design decisions tend to drive operational costs for as long as 10 – 20 years. We recommend a measured approach, taking into consideration complexities, costs and benefits to the states and employers.