Is this the employee covered in Michigan, or another state?
Part of my daily tasks is answering member’s questions. When a particular question begins to surface weekly, it’s time to share the question and answer with all of our members. The recent regular question looks like this “Is my employee in Indiana covered by my MTM policy?” With more remote working going on especially in sales and clerical/engineering jobs it seems logical that this question is coming up more.
While the rules can vary by state, and in fact even in Michigan there is a complicated more than 15 question criteria that is used, there are three or four much more simple questions that answer the vast majority of situations. Because our members need quick reference answers, let me walk you through this simple criteria.
- Are they a W2 employee or a 1099 independent contractor?
- Does the employee work at your Michigan shop?
- Where does the employee reside?
- What state taxes do you withdraw from the employee’s check?
Maybe some examples would be helpful.
Example #1
Your shop is in Southeast Michigan. A W2 employee lives in Toledo and you withdraw Michigan taxes from his paycheck. This employee is a Michigan employee for workers’ compensation coverage and also premium calculations.
Example #2
Your shop is located in Oakland County. You have a W2 employee engineer who resides in Pennsylvania and you deduct Pennsylvania taxes from their paycheck. This employee is NOT covered by your MTM policy and we need to work with you or your agent to get Pennsylvania coverage.
Example #3
Besides your Michigan operation, you opened a small satellite shop in Indiana. The shop has a local business license and you hired 3 employees who live in Indiana. You withhold Indiana taxes from their paychecks. These employees are NOT covered by your MTM policy and we need to work with you and your agent to get Indiana coverage.
There are more tests than these and the tests vary by state, but these general criteria give us a good starting point.
The state tax withholding has come up recently as a state workers’ compensation enforcement tool. Many states have a very good system tied between withholding taxes and validation of workers’ comp. coverage. If you are withholding state taxes in another state, many states will have that cross referenced to their state workers’ compensation system and will send you a penalty notice because your shop does not show a workers’ comp. policy for that jurisdiction.
My goal in this short article was to give you a quick picture and a quick test for validating state coverage. Of course we are anxious to help you with your particular situation and when the circumstances are more complicated. Please call our marketing department or me and I would be happy to review it with you.
Until next time, work and play safe and talk with you soon. — John
