Should my trucking company withhold a different state for an employee?
This is a question we get a lot from both owners of companies and from the employees themselves. It can be a tough one to decide. While you want to keep everyone happy, is it worth it for your trucking company? While I’m not going to tell you what you should do, I will tell you what we always recommend to our clients.
Should you withhold a different state for an employee?
We don’t recommend it. Here why. Let’s say you are a Michigan-based company withholding Michigan state tax as you should for your W2 employees. Now let’s say you hire a new driver, Joe, from Indiana. Joe wants you to withhold Indiana for him because his last place did, so why can’t you? You need the driver so you say sure! So you register with Indiana.
A few weeks later, though the grapevine, Bob hears that you are withholding Indiana for Joe. Well, he just moved to Kentucky. You don’t want Bob to get mad and leave over this so you withhold Kentucky.
You know have an endless cycle and three states that can go poking around your trucking company. Even if you aren’t doing anything wrong, it’s a lot more eyes on your company.
Furthermore, say Joe leaves after a few weeks. You aren’t used to withholding extra states and forget to either file zeros or discontinue Indiana. Now you have penalties.
What should you do?
We recommend only withholding the states you are legally required to withhold. Those states would be any state you have a physical presence in. i.e. a building, office, terminal. This not only keeps things streamlined for payroll and lessens confusion, but it’s also a clear policy for your company. As for the employees that live in other states they have options. Any tax professional worth their salt is going to know how to handle the situation. We always recommend drivers talk with their professional when filling out state and federal W4s. Everyone has different goals when it comes to money and everyone’s situation is different. So there isn’t a one size fit’s all answer when it comes to taxes.
Bottom Line
In the end, it’s up to you as the employer to make this decision. If you are unsure, or even if you think you are sure what to do, talk to your tax professional. They are the true experts on this.
Disclaimer: This article is meant to be a general overview. Consult a tax professional or your attorney before you make any decisions to ensure that you are following local laws.
Written by Harley Houlden
Harley joined Superior Trucking Payroll Service (STPS) in early 2019. With nine years of customer service experience, she truly understands what it takes to make our clients happy. She loves working at STPS because of the family-like atmosphere. Harley’s favorite place to be is Traverse City, Michigan or anywhere that has hippos
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