Does 7shifts support Courtesy Withholding?

Question

How can I ensure my Employee is taxed for their home state (legal address), rather than the business location? 

Answer

Yes, 7shifts can support Courtesy Withholding to ensure appropriate state taxes are withheld from an employee's pay. However, it's important to understand how these changes are applied:

• Forward-Looking Application: Courtesy withholdings can only be applied to future payrolls once the setup is complete.
• No Retroactive Changes: The system cannot retroactively apply withholdings or recalculate taxes for payrolls that have already been processed. Any requests for retroactive withholdings are currently considered a feature request.

• Employer Responsibility for Tax IDs
  If Courtesy Withholding creates new state tax obligations, the employer must apply for the relevant state Tax IDs.

  • You’ll need to register with the new state tax agency, just as you did for your business’s primary state.

  • While those new states may initially appear in Applied For status, this will not block payroll. Most agencies recognize that Courtesy Withholding is being used.

  • Each state treats courtesy withholding differently. Some allow filings/payments under an “applied for” tax ID, while others reject them. If a state rejects the filing, the payment will be refunded to the employer, who must then pay the state directly once registration is complete. Because of this variability, outcomes are not guaranteed until the state accepts an actual filing.

If the Employee lives in a different state than your business location and is not classified under one of these States, please contact our support team to begin the process and ensure your employee's tax information is configured correctly for all future pay runs.