Administering taxes and insurance for out of state employees.
January 30, 2010 8:19 AM Subscribe
Non-profit overwhelmed with prospect of setting up and administering taxes and insurance for employees who will be located in other states.
We are a small research-oriented non-profit (about 20 employees). We occasionally need to hire students and researchers who work in other states as employees. The immediate problem are two students who work half-time for us in Oregon. We have hired them as contractors until we figure this out, but given the length of time they are working for us and the level of oversight inherent in a student position, it isn't credible to call them contractors.
Our understanding is that we need to setup a business, pay employment taxes and insure ourselves in Oregon in order to hire them as employees. Before we embark on this, I wanted to know if is there some arrangement that would allow us to contract with a company that operates in Oregon or some other solution.
We could potentially need to hire people in 5-6 states at a time. In addition the states will change over time. Setting up and administering the taxes and liability in more than one state is overwhelming for a small non-profit like us. This has got to be a common problem, even if you just look at non-profits. Has anyone found a reasonable cost solution here.
We are a small research-oriented non-profit (about 20 employees). We occasionally need to hire students and researchers who work in other states as employees. The immediate problem are two students who work half-time for us in Oregon. We have hired them as contractors until we figure this out, but given the length of time they are working for us and the level of oversight inherent in a student position, it isn't credible to call them contractors.
Our understanding is that we need to setup a business, pay employment taxes and insure ourselves in Oregon in order to hire them as employees. Before we embark on this, I wanted to know if is there some arrangement that would allow us to contract with a company that operates in Oregon or some other solution.
We could potentially need to hire people in 5-6 states at a time. In addition the states will change over time. Setting up and administering the taxes and liability in more than one state is overwhelming for a small non-profit like us. This has got to be a common problem, even if you just look at non-profits. Has anyone found a reasonable cost solution here.
These issues are a huge burden for any small business (profit or non-profit). I highly recommend using a "HR company" to just manage it for you. The cost is not that significant and you have piece of mind that you're not breaking any laws. You also possibly get a better deal on insurance benefits because you're part of a bigger plan where they pool many small companies together. I am using Trinet which I have found to be very good.
posted by Long Way To Go at 9:19 AM on January 30, 2010
posted by Long Way To Go at 9:19 AM on January 30, 2010
CBIZ
There are many other providers. Here's the Google search I used to get the results.
Outsourcing is the way to go for a small organization like yours.
posted by Ironmouth at 9:32 AM on January 30, 2010
There are many other providers. Here's the Google search I used to get the results.
Outsourcing is the way to go for a small organization like yours.
posted by Ironmouth at 9:32 AM on January 30, 2010
A small non-profit I worked for uses Paychex. Paychex can handle payroll, benefits and retirement plans for you.
Another option that I know of is Small Business United out of Texas. (www.sbua.org) It serves many associations and non-profits to make group benefits available for major med, mini-med, hospital indemnity, STD and LTD and other fringe benefit plans.
PS Not sure if you are aware of this, but the IRS has very strict definitions of "independent contractor" (people you pay with a 1099). You can't just make any employee an independent contractor.
posted by FergieBelle at 10:13 AM on January 30, 2010
Another option that I know of is Small Business United out of Texas. (www.sbua.org) It serves many associations and non-profits to make group benefits available for major med, mini-med, hospital indemnity, STD and LTD and other fringe benefit plans.
PS Not sure if you are aware of this, but the IRS has very strict definitions of "independent contractor" (people you pay with a 1099). You can't just make any employee an independent contractor.
posted by FergieBelle at 10:13 AM on January 30, 2010
Response by poster: Just to clarify, the insurance benefits (medical, retirement) are not the issue. It's meeting the payroll tax and workers comp insurance requirements for individual states. The recommendations regarding services that operate like temp agencies are helpful - you pay them as contractors and they hire your out-of-state employees and meet the state tax and workers comp insurance requirements. Further recommendations for other good, reasonable services for non-profits most welcome.
posted by alcahofa at 11:28 AM on January 30, 2010
posted by alcahofa at 11:28 AM on January 30, 2010
I worked for a company that was unwilling to pay all of those taxes just to employ people in other states. It was a HUGE burden.
The only reasonable workaround was for those people to be independent contractors.
I also worked for a non-profit that had people doing work for them all around the country, once again, we were all labeled contractors.
It is important that those individuals understand that they'll be responsible for their own social security payments, if you go this route.
posted by k8t at 12:33 PM on January 30, 2010
The only reasonable workaround was for those people to be independent contractors.
I also worked for a non-profit that had people doing work for them all around the country, once again, we were all labeled contractors.
It is important that those individuals understand that they'll be responsible for their own social security payments, if you go this route.
posted by k8t at 12:33 PM on January 30, 2010
It sounds to me like you just need a payroll service, like Paychex or ADP. They can be full service to the extent that you just submit how many hours each employee worked each pay period, and they take care of all the withholding, taxes, quarterly filings, and W-2s. They would definitely be able to handle multiple states. It's been a while since I've used them, but I remember they are not super cheap.
If you're using QuickBooks software for your bookkeeper, you can also subscribe to their payroll service (which keeps your tax tables and such up to date) and they will calculate the amount you have to submit to each taxing agency. I haven't done it myself, but I don't see why it wouldn't work for multiple states. That may be cheaper, because even though it calculates everything for you, you're submitting the payments and filings yourself.
I was the bookkeeper for a non-profit and we used a payroll service through our bank, Chase. I entered the number of hours each employee worked (they were already set up with their W-4 info), and it told me how much was owed for state and federal taxes/withholdings, and each quarter it told me how much was owed for state unemployment insurance. It also took care of direct deposit for the employees. I think we paid around $100/month for around a dozen employees.
posted by nowmorethannever at 5:47 PM on January 30, 2010
If you're using QuickBooks software for your bookkeeper, you can also subscribe to their payroll service (which keeps your tax tables and such up to date) and they will calculate the amount you have to submit to each taxing agency. I haven't done it myself, but I don't see why it wouldn't work for multiple states. That may be cheaper, because even though it calculates everything for you, you're submitting the payments and filings yourself.
I was the bookkeeper for a non-profit and we used a payroll service through our bank, Chase. I entered the number of hours each employee worked (they were already set up with their W-4 info), and it told me how much was owed for state and federal taxes/withholdings, and each quarter it told me how much was owed for state unemployment insurance. It also took care of direct deposit for the employees. I think we paid around $100/month for around a dozen employees.
posted by nowmorethannever at 5:47 PM on January 30, 2010
Response by poster: we use quickbooks which provides the functionality of any payroll service. the issue is establishing a business in every state where you want to operate. so what we're looking for is more like a national temp agency rather than a payroll service. we don't want to get on the raidar and maintain our business status in 15 states over the next 5 years.
posted by alcahofa at 11:17 AM on January 31, 2010
posted by alcahofa at 11:17 AM on January 31, 2010
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You might be able to structure your out-of-state workers as independent contractors, or contract with an out-of-state company to have the work done, but you have to be careful about how you specify the work, and how much control you have over the people doing it. (OP: actually, it's clear that you understand this already.)
The cost of a lawyer, for a few-hour consult, will be much less than the cost of screwing it up and having to sort it out later, even if you don't count your own time dealing with it, or the impact it'll have on whatever your non-profit is supposed to be doing. You're paying for the lawyer to know (or find out) the rules and turn them into a step-by-step that you can use yourself. You don't have to hire the lawyer to do all the work every month at payday! The "figuring out" part is what's overwhelming; after you know, it's pretty much just paper shuffling.
IAAL, IANYL, TINLA.
posted by spacewrench at 8:36 AM on January 30, 2010