You may be wondering as an employer what you need to do if you happen to hire an employee that lives in another state. It is a fairly common scenario if you live close to a state line, and you want to be careful so that you do not end up having to file amended returns. Generally what you need to do is:
- Step 1: Withhold state taxes where the employee lives
- Step 2: Send that withholding to their home state
Some states will want you to withhold a non-resident tax, so that is something that you will want to be aware of and plan for accordingly as well. On the other hand, unemployment will be taxed based on where the employee actually works.
Using payroll software to help keep track of and separate taxes can help to alleviate the worry of making mistakes on your compliance forms. Advanced Micro Solutions has been in business for over 35 years, offering a complete solution when it comes to processing payroll as:
- A small business wanting to process your own payroll
- A CPA firm processing payroll, W-2s, and 1099s for multiple clients
- A dedicated payroll processing service
Our 1099-etc software package includes the ability to separate where an employee lives versus where they work to accommodate almost any tax situation that may arise. Download our free 1099-etc Demo software today to confirm that the software can meet your needs. If you need additional support, we have live experts who can help you via phone, chat, fax or email.
Support is provided free of charge from 8 AM – 6 PM Central, Monday – Friday, with extended and Saturday hours in January and April.
Frequently Asked Questions
- How do you manage 1099 state filing requirements across multiple jurisdictions? – Comprehensive accounting and payroll software can simplify how you handle any mismatched filing thresholds, combined federal and state filing assumptions, and inconsistent state withholding requirements.
- Can payroll software handle calculations for payroll deductions, such as federal and state income taxes? – Yes, the most comprehensive payroll software offers tools for automatically calculating federal, state, and local payroll taxes. You should avoid all manual calculations for these business taxes.
This article was updated on June 13, 2026 to keep its information as fresh as possible. We update this article every six months, before and after tax season, to keep current with any changes.