Why doesn't payroll automatically update your "worked in" location when you change your address?

Did you know: Payroll doesn’t update tax settings automatically when someone moves. That’s not a bug. But a heads-up would be nice.

If you live somewhere where it’s common to commute across state lines, having different settings for where someone lives and works seems natural.

But the tax code hasn’t quite caught up to a world where someone in Phoenix might “report to” an office in Philadelphia. Or where someone who lives in Las Vegas boards a plane to “commute” to San Francisco each week.

Here are five examples of what really breaks when payroll gets “lived in” and “worked in” settings wrong.

1️⃣ When you live in one state but your office is in another, which state pays parental leave?

A worker commuted from Oregon to an office in Washington... some of the time. As her delivery date came closer, she worked from home more often. 

So when she applied for state parental leave, she applied in Oregon, where she lived and worked. Her claim was denied.

Luckily, she’d been paying taxes in Washington just long enough to qualify for payment there. If she’d started two months later, she would have been SOL.

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2️⃣ It’s all fun and games until someone files for unemployment.

A worker moved from Florida to Maryland. He updated his address in the HRIS, but no one ever flagged it to HR. 

A few months later, he was laid off. When he filed for unemployment, Maryland had no record of him. 

His claim was delayed, and the company got heavy penalties for unpaid back taxes.

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3️⃣ You think paying your state taxes is hard? Try demanding them back.

Massachusetts has state income tax. New Hampshire doesn’t. An employee moved from MA to NH in May. When he filed his tax return the following April, he discovered that he'd been paying Mass taxes for 7 months. 

He had to file an extension to give HR time to sort it out. 

Then file a nonresident return in MA. 

Then a resident return in New Hampshire. 

It was after Thanksgiving before he got his money back. 

His accountant was grateful for all the billable hours.

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4️⃣ Don’t forget about PTO, yo.

Because Montana doesn’t require sick time or PTO payouts at termination, a company had a combined PTO policy in MT. California requires both sick time and that unused vacation get paid out at termination, so the company had a separate policy there. 

When an employee moved from Missoula to Mesa Verde, no one updated his PTO policy. When he left the company a few months later, he was paid out for an extra month of PTO based on the Montana policy. Lucky him.

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5️⃣ Worker’s Complication

A Michigan worker moved to Washington for a job. Payroll kept withholding Michigan taxes, so he wasn’t enrolled in WA’s Worker’s Comp. Oops. 

He got hurt on the job. Michigan worker’s comp denied the claim. Washington approved it, eventually. But not without huge fines for the employer. 

Don’t mess with Washington L&I.

I see this all the time. If it’s happening to you, let’s talk. I’ve probably already fixed that exact issue.

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