Driver Payroll is Complicated: Learn the Rules to Follow
There are a lot of laws and regulations for trucking companies to stay on top of and payroll tax rules are no exception. Due to the nature of transportation, companies can employ drivers from other states or even remote employees. This can provide additional challenges for the company’s internal staff, especially for small to mid-size fleets.
Most payroll and HR professionals are fluent in their resident state’s laws and regulations. However, we’ve seen some situations where trucking companies mistakenly set all payroll tax withholding to where the company is headquartered, which may not be correct. If a trucking company employs drivers outside of their home state, they should follow the Amtrak Act.
The payroll tax rules for out-of-state trucking company employees
The Amtrak Act is a federal law exempting employees who provide duties in two or more states from paying withholding taxes to any state other than where they reside. This means as their employer, you should withhold state taxes, pay unemployment, file payroll tax returns, etc. in each driver’s resident state.
We’ve seen some situations where trucking companies mistakenly set all payroll tax withholding to where the company is headquartered, not where the drivers live. Not only does this not meet Amtrak Act requirements, but it also complicates tax matters for your employees and could jeopardize them receiving state unemployment or disability benefits if needed.
Payroll can be a complicated item, and one that certainly impact your company’s ability to hire or retain drivers. Review your current payroll procedures and onboarding process. Are you handling your driver payroll properly?
How we can help
Our transportation team is well versed on the Amtrak Act rules and can help get you set up and make sure you’re compliant. Our consulting and outsourcing team can help get your payroll withholding set up correctly for current and new employees.
Andy is a CPA and trusted advisor with 15 years of experience providing tax, accounting, assurance, and consulting services to transportation industry owners and operators. He is a tax principal with CLA in the Minneapolis, MN office. He also consults with high net worth individuals and owners of closely-held transportation businesses on all aspects of tax planning, estate planning, and retirement planning. Andy is also the tax leader for transportation industry across CLA.