Employee Mobility and State Tax Withholding

Some states, notably California and New York, are enforcing laws which require individuals to pay state income tax on deferred compensation for the portion of time the individual worked in the state when that compensation was earned. Due to state budget deficits, we expect more states to focus on the enforcement of withholding and reporting requirements related to compensation from stock options and awards.

Employers are required to report income and withhold taxes based on these state laws. Today most companies are not in full compliance with state laws and are ill equipped to deal with the changes to their equity compensation systems.

Our equity team is working with several clients to ease the administrative burden to the stock administrators and downstream systems that provide data to the states. Our solutions incorporate the following:

• Standard allocation methods across states
• Means to track employee mobility
  • Capture of mobility data
  • Interfaces to Stock Equity Admin systems
• Reporting for state withholding taxes based on mobility tracking
  • Interfaces to payroll
  • Interfaces to accounting systems
  • Interfaces to brokers

Our solutions are driven by several guiding principles:

• Minimize errors for our clients
• Prevent detrimental impacts to the employees when possible
• Control the cost and administrative burden on the administrators