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Employee moved from AL to MS and didn't update her tax withholdings and now she wants a W2C

Are companies legally required to issue a W-2 C if the employee moved mid year and didn't update taxes. As the employer, I would need to amend 3Q17 and 4Q17 tax filings for MS and AL which will be very costly. The employee never paid taxes to MS, so what would be amended. Your help is greatly appreciated.


  • I would do nothing. Well, I would add an address verification statement to be issued De 1, and returned by Dec 15, not for WH, but for form mailing. Employee has the ability to self correct, via filing returns and making their own deposit.

    I cannot answer on the legality, just what I would do... since I care not about resident taxes, only taxes I have a nexus for (assuming not an at home worker).

  • She worked from home when she moved to MS.

  • Not the question, but you have an internal control problem if an employee moving out of state (unless it is contiguous) did not raise red flags. An employee working out of their house is almost certainly legally "nexus" for the company. However you handle your current issue, you have a process issue you still need to fix. MS and AL are contiguous (if my geometry is working today), but there still needs to be a formal procedure anytime the work place changes. Having an employee working out of their home is legally the same thing as opening a warehouse or other facility in most states.

    I used to work for a Fortune 500 company that had employees in 43 states. We had legal reasons (point of legal presence unrelated to workers) in 7 states, meaning the other 36 states were mostly mistakes. Our Big-4 audit firm told us that our letting employees pick-their-state was costing us more then one million dollars a year in excess taxes.

    Your employee working at home legally means that your company likely now has a legal business presence their for ALL tax purposes, including sales tax and corporate taxes. Different states have (very) different rules, but generally speaking letting an employee create a new nexus for the company by working at home is something that should be decided at a very high level (corporate tax attorney). Someone who knows what the decision actually means. I have never meet an HR person who was clear on this point.

    There is a tendency for payroll to only think about payroll laws, and HR to not think about much of anything but there are generally other issues such as sales tax and corporate taxes anytime an employee works in an out of state office. My "favorite" court case was a guy named Huckaby who lived and worked in TN. A NY company bought his old company out of bankruptcy solely to get a program Huckaby had written. Huckaby still lived and worked in TN, but one day a month traveled to NY for meetings. NY argued that the company could have moved Huckaby to NY if they wanted to, and under the NY's "convenience of the employer" rule all Huckaby's wages were fully taxable in NY. This was in addition to whatever Huckaby was paying TN. This went to court and NY won. This stuff can be very complicated. Having out of state employees working out of their houses is legally a bad idea.

  • Regarding the actual question, if it was my mistake, I fixed it, no matter the cost If it was the employee's mistake, I would not. If it was HR's mistake, life gets interesting. In my world, HR are a lot like air traffic controllers. Whether then plane lands, or the plane crashes, HR gets to go home to their dinner on time. Payroll cleans up their messes.

  • Agree with David. If this is the employees error, it would not be corrected. My W2s equal my system of record. If our system reads live in Ky and work in OH taxes will be calculated accordingly. If the employee moved and did not tell us we would not issue a W2c. Now if the employee moved and did notify Payroll, and we did not make the appropriate updates we would issue a W2c, as it was our error.

    Payroll and payroll tax compliance is very involved. As noted previously you must consider nexus, the convenience of the employer rulings, and there is 14 day NY rule and on and on, just to mention a few.

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