Income tax withholding responsibility?
November 10, 2017 12:38 PM   Subscribe

Can a publicly funded institution be compelled to withhold income taxes for employees who live in cities outside of the institution’s location?

If I work in city x, is my employer under any legal obligation to withhold city x’s income taxes from my pay, or am I solely responsible for making sure this takes place (as I have been doing)? I am in the USA and in the Midwest. You are not my tax accountant, etc.
posted by Big Chief Little Pants to Work & Money (7 answers total)
Are you asking about all income taxes, or just your city's income tax? Your question is unclear.

Your employer is legally obligated to withhold federal income tax. Without knowing what city you're talking about, it's impossible to say if they're legally obligated to withhold city income tax, but--probably?
posted by Automocar at 12:45 PM on November 10, 2017 [1 favorite]

Yes. For example, all PA employers need to withhold wage tax for residents of the city of Philadelphia, even if the employee simply lives in Philadelphia while their place of work is located in a different PA city.

This varies based on location, however. Some city-based income taxes are based exclusively on place of work, and not place of residence. There's all sort of rules all over the country; we'd probably need to know your specific place of residence and employment to give you the answer as it applies to you.
posted by eschatfische at 1:11 PM on November 10, 2017

My experience as a resident of the City of St. Louis, which has an income tax, while working outside the City of St. Louis for companies that are not subject to the city income tax, no.

I've worked for a couple Big Companies that have not taken out city taxes. My solution is to have an extra 1% (city tax is 1% of gross pay) taken out of Federal.
posted by notsnot at 1:20 PM on November 10, 2017

In the Philadelphia case: if a Philadelphia resident works for an out-of-state employer, apparently they are responsible for paying the "earnings tax", which is just the city wage tax by another name. (A Philadelphia resident working for an in-state but not in-city employer would have the tax withheld.) So in particular it probably matters if you're crossing state lines.
posted by madcaptenor at 1:24 PM on November 10, 2017

This is a highly technical question that will vary depending on the specific cities you are in.

The company will have to comply with the tax laws in jurisdictions which they have nexus. If you live in a city where they don't operate business, it's possible they will not collect the local tax. Some states will administer taxes for the local jurisdictions, so having nexus in one state will guarantee compliance with all the local taxes.

It's also possible that working remotely might trigger nexus, so they should be collecting tax on behalf of your city.
posted by politikitty at 2:04 PM on November 10, 2017

It depends on the state and city. There's no general case.
posted by so fucking future at 3:15 PM on November 10, 2017

If the company is in state a, and you are in state b with city c, they are probably supposed to, and state b probably passed a law that all companies have to, but without jurisdiction on a since it's in a different state, i doubt it's legally binding. But that may be compounded by employer taxes vs employee taxes.
posted by TheAdamist at 5:20 PM on November 10, 2017

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