Out of State Employees: Tax Requirements

Definition of Out of State Employee

An employee who primarily resides outside the state of North Carolina and who works for UNC Charlotte and who never or rarely travels to UNC Charlotte to perform work. Examples:

  • A part-time faculty member teaching online classes 100% remotely.
  • A full-time faculty member on paid leave residing out of state and working on grant activity for UNC Charlotte.
  • Additional examples are included in the FAQ section of the “Physical location of workforce” webpage (linked below under Resources).

Procedures

If you are hiring an out-of-state employee, or allowing a new agreement or extension of an agreement for staff teleworking or faculty duty station changes, the University’s Tax Office should be notified at least eight (8) weeks prior to the employee’s start date. Human Resources and/or Academic Affairs Budget and Personnel must approve these arrangements before they start and be in agreement with the Tax and Payroll offices.

  • Employees must clearly and explicitly disclose their intent to telework from a remote worksite that is located in another state via one of the following forms:
  • If the telework arrangement is approved, management must notify the Tax Office of the employee’s out-of-state worksite.
  • Out-of-state teleworking arrangements may introduce tax withholding and reporting, unemployment insurance, and workers' compensation requirements in the employee’s state of residence, among other considerations.
  • Supervisors and business officers should be aware of the general administrative requirements associated with an out-of-state arrangement.
  • An eight-week lead time may be required between notification of the out-of-state teleworking arrangement and the start date of the arrangement to avoid state reporting and withholding penalties, interest, and late fees.

At this time, a workforce abroad should be avoided if possible due to the direct and indirect costs of compliance.

Additional Considerations

  • Hiring preference should be made for in-state employees when all other factors are equal. As a North Carolina entity, UNC Charlotte has a responsibility to provide NC public sector jobs when possible.
  • ​​​Departments must consider additional tax-related costs and setup time required to employ an out-of-state employee. Pass-through costs (e.g., state-specific benefits) may apply to individual employees or their hiring departments. 
  • Costs are incurred every time the University must set up to withhold income taxes and set up unemployment insurance in other states. To check if the University is already set up in a specific state, contact the Tax Office

Background

The default rule of state income tax withholding is to withhold income tax for the state in which services are performed, according to guidance from the IRS (Internal Revenue Service) and SSA (Social Security Administration). Requirements to comply are different in each state and may encompass:

  • Employer registration
  • Employment and wage laws, including minimum wage and required pay frequency
  • Income tax withholding
  • Other taxes/withholding (e.g., disability, paid family leave, local jurisdiction requirements, required benefits)
  • Monthly/quarterly/year end reporting
  • New hire reporting
  • Unemployment insurance (UI)
  • Workers' compensation

Resources

Contacts

Contact the Tax Office for additional guidance. 

Created February 2019
Rev. 3/5/19, 6/11/19, 10/4/19, 11/06/20