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"SUI Where You Work and SIT Where You Live"

This has always been the phrase used to remember where SIT and SUI applies, when you have EEs working in a different state than where they live. Now I hear people say it the other way. What is valid? Why would you pay SIT where you work instead of where you live? I am trying to make sense of this and see who is correct and if this is a good phrase to keep using. Thanks.

Comments

  • rrupertrrupert ✭✭✭

    It's totally going to depend on the relationship between the two states and their own state guidelines. There is no hard a fast "one rule fits all" states and multi-states.

  • David WarrenDavid Warren ✭✭✭✭

    Almost all states belong to something called the Interstate Reciprocal Coverage Act. Follow those rules and you are probably fine.

    SIT is very complicated. The states all use different rules and they do not play nice with each other. If you want a look at the Dark Side, Google "Huckaby" and "New York". CT was talking fairly seriously about trade wars or something else nasty over a different case whose name I forget.

    If you are serious, subscribe to one of the payroll library services (APA, BNA, CCH, RIA). But there is no simple answer for SIT (or locals).

    rrupert
  • Thank you both. I can't believe I was told this rule in the previous payroll company I worked and we all went by it.

  • David WarrenDavid Warren ✭✭✭✭

    The definition of a senior manager is someone who sees God in the mirror everyday.

  • Actually, the rule is mostly valid (like being "mostly dead" in the Princess Bride) in an area that has broad SIT reciprocity such as the Midwest (Great Lakes area). For example, for a Michigan employer it would apply for people working in Michigan who live in Michigan, Ohio, Kentucky, Indiana, Illinois, Wisconsin, and Minnesota. However, it would not hold for an Illinois employer who has employees who work in Illinois but live in Indiana. Illinois has agreements with Michigan Wisconsin, Kentucky, and Iowa, but not with Indiana. Indiana has agreements with Michigan, Wisconsin, Kentucky, Ohio and Pennsylvania, but not with Illinois.

    The other part of the "truth" is that wages are always taxable in the state in which the employee lives (unless the state does not have an income tax) but that they are always taxable in the state in which the employee works. The state in which the employee works generally allows a tax credit (within limits so that the employee mostly does not pay taxes on the same income to both states) for the wages earned in other states.

  • Sorry - misspoke in prev post.
    Should have said --- The other part of the "truth" is that wages are always taxable in the state in which the employee lives (unless the state does not have an income tax). If there is no reciprocal agreement, they are also taxable in the state in which the employee works (unless it does not have an income tax). The state in which the employee lives generally allows a tax credit (within limits) so that the employee mostly does not pay taxes on the same income to both states for the wages earned in another state. .

  • David WarrenDavid Warren ✭✭✭✭

    Also, not all states have reciprocal agreements and those that do have different rules from each other. Functionally if you are going do this for real, subscribe to one of the paid on-line payroll services (APA, BNA, CCH RIA), and look up the rules for the specific pair of states.

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