Payroll blocked by pending State Tax ID’s? The ‘applied for’ status could help.

by 
Jim Kohl

Imagine you’re the lone payroll administrator for your business. You’ve spent hours preparing this week’s payroll, only to find that it’s blocked by a new employee whose state has not been set up in your payroll system. Even with only one employee causing the issue, suddenly you are blocked from running payroll. It can be a devastating moment, filled with fear. Does this mean no one can get paid? Who do you call to get this fixed, and how long will it take? 

Luckily, this situation doesn’t have to be dire. Let's take a few steps back and learn what can be done to resolve this issue today, and help you be more prepared in the future.

Registering for State Tax ID’s

Back before the pandemic, offices were the primary location where you would find most workforces. Even companies with more than one office would usually employ folks in a few, predictable locations. These geographically centralized workforces meant only a few registrations were needed to deposit payroll taxes. Simply put, if all of your employees worked in a central New York office, you only needed a New York Tax Identification number (and a Federal ID, which is required for everyone). Generally speaking, this made managing State Tax IDs and depositing payroll taxes simple. 

While adopting and embracing remote work can offer many benefits to employers, it has also made payroll more complicated. If that same New York company hires new remote employees in both Connecticut and Ohio, they would need to apply for for ID’s in both states. As more employees are onboarded, the need for additional State Tax IDs grows. 

Quickly unblock payroll with the ‘applied for’ status

As we know in the payroll world, the trains never stop. So, how does a company process payroll for an employee in a new state when they haven’t received the new ID number? That’s where the ‘applied for’ status comes in. This option helps companies temporarily skip this process, and get employees paid. 

State agencies are not always the fastest moving authorities, and acquiring a new State Tax ID number can take time. Though some states do provide them immediately, like California, most payroll systems will block payment when a state is not configured properly. But, a good system will allow for the temporary option to note that the ID has been “applied for”.

If a new State Tax ID is blocking payroll, these quick fixes allow for all employees to be paid on time. This is great news for payroll administrators, but there is one final step before the payroll is truly complete.

Next steps for end of quarter tax filing

Using “applied for” can work in a pinch and can ensure folks are paid timely, but it should be viewed as a temporary solution. Filing at the end of the quarter with an “applied for” status is allowed in some states, but is outright rejected in others. In some cases, filing with an “applied for” as a State Tax ID can lead to penalties and misapplied payments. 

It’s important that any State Tax ID’s in the ‘applied for’ status are followed up on before the end of the quarter, when tax filings are prepared and remitted. A good payroll provider will not only offer walkthroughs on how to apply for a State Tax ID, but also remind companies to share the information once it’s been granted. 

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