Client Reporting States: 8 Steps To Maintain Compliance on a PEO

Managing compliance for state and local reporting can feel like a never-ending task, even with the help of a professional employer organization (PEO). For example, client reporting states can add an extra layer of confusion to the payroll and reporting process.

When you’re on a PEO, there are two types of payroll reporting: client reporting states and PEO reporting states. In client reporting states, you are still responsible for managing your payroll accounts under your own employee identification number (EIN). In these states, you do not file under the PEO’s payroll tax accounts, and your company will have to handle any corporate tax filings or business registrations.

This is unlike PEO reporting states, in which your company uses the PEO’s payroll accounts to file with the state. As a result, your payroll and reporting procedures may be significantly affected.

This guide will walk you through eight essential steps to maintaining reporting compliance, noting the differences between client reporting states and PEO reporting states.

1. Understand Your State-Specific Requirements

Not every state plays by the same rules when it comes to payroll reporting.

As your business expands into new states, you’ll need to know the specific reporting requirements of each location. These can include state withholding, unemployment insurance, workers’ compensation insurance, paid family and medical leave, and even local taxes that vary by city or county.

For instance, while one state might require you to file quarterly reports on your workers’ wages and tax withholdings, another might need monthly reports. Let’s not forget about local governments, either — some cities have their own reporting requirements on top of state-level ones.

For client reporting states, you cannot rely on your PEO to do this research for you. Not only will you need to study state requirements, but you will have to complete the registration process yourself to set up the accounts. While you can (and should) communicate with your PEO to avoid compliance gaps, it remains your responsibility. Your PEO may, or may not, still file reports and returns in client reporting states using your account numbers. You’ll want to confirm where this responsibility lies.

The key is to do your homework. Make sure you’re up to speed on what each state (and city) requires so you’re not caught off guard by surprises. If you operate in multiple locations, setting up a system to track these different requirements is a good way to stay organized and avoid missing important deadlines.

2. Set Up Payroll Accounts in Each State

When expanding into new states, one of the first things you’ll need to do is set up your payroll accounts. These accounts are necessary to handle state income tax withholding, unemployment insurance, and other payroll-related taxes.

When entering client reporting states, this process can be more complex than in PEO reporting states. That’s because you must open payroll accounts directly with the state rather than outsourcing to a PEO.

Your PEO will likely not assist with this process, as the account will be tied to your company’s EIN and fully owned by your company. Therefore, you will want to keep a tighter watch on how to complete the process and if it is set up correctly.

The tricky part is that each state has its own process for setting up these accounts. Some states make it easy with an online registration system, while others may require more paperwork or have longer processing times.

As such, you should be proactive. Don’t wait until the last minute to get your payroll accounts in order, as missing the registration window can lead to delays in paying your employees or penalties for late tax payments.

It’s also worth noting that in some cases, you may need to register for payroll accounts at both the state and local levels, depending on where your employees are located. Taking care of these registrations early ensures you can smoothly handle your payroll from day one.

Register for payroll accounts, hassle free.

Get your ducks in a row to setup payroll in client reporting states and automate the registration process with Mosey.

Talk to an expert

3. Keep an Eye on Reporting Deadlines

Once your payroll accounts are set up, the next challenge is keeping track of all the reporting deadlines.

Missing a deadline can result in hefty fines, and unfortunately, the deadlines aren’t always consistent from state to state. Some states require payroll reports to be submitted quarterly, while others may require monthly. This is usually dependent on your total payroll amount and employer status in the state.

On top of that, the deadlines can sometimes change based on the size of your business or your number of employees. Knowing the original deadlines isn’t enough — you need to know how changes inside your company might affect those deadlines, as well.

In a PEO reporting state, your PEO will handle filings on your behalf. When you’re operating in a client reporting state, the responsibility for meeting these deadlines falls on you. While you can ask your PEO for guidance or resources, it is ultimately your EIN account, not theirs, on the record. As a result, you will only have yourself to blame if compliance requirements slip through the cracks.

Mosey can help you with this task. Our compliance platform can keep you informed about upcoming deadlines so that you never miss a report and, as a result, avoid late filing fees. We can also help you stay on top of changes to compliance laws, which we’ll cover in the next section.

4. Stay Updated on Changes in State and Local Laws

State and local labor laws are constantly evolving, so your payroll compliance strategy must evolve with them.

Whether it’s new minimum wage laws, updates to family leave policies, or changes to tax rates, keeping up with the latest regulations is necessary to avoid non-compliance.

For example, several states have recently introduced new wage transparency laws that require businesses to disclose salary information in job postings or to employees upon request. If you’re unaware of these changes, you could easily fall out of compliance without realizing it.

It’s even easier to fall out of compliance when these legal changes occur in a client reporting state. With two types of account management, you can’t solely rely on PEOs to have systems and processes in place to track updates to state and local laws for all your accounts.

When the burden shifts to business owners in a client reporting state, it’s unlikely you have the same experience, especially if you’ve only ever been on a PEO. Now, you face a higher administrative burden to track these changes yourself, incur more direct risks if something is missed, and have the added complexity if you operate in multiple client reporting states.

The best way to stay on top of these updates is by regularly reviewing the labor laws in the states where your employees work. You can also sign up for newsletters or alerts from state labor departments to ensure you know any new laws that could impact your reporting. Additionally, Mosey can automatically notify you of relevant updates to legislation.

5. Automate What You Can

Manually managing payroll compliance is time-consuming and leaves room for error. That’s why automating as much of the process as possible is one of the best ways to ensure you stay compliant without worrying about missing a deadline or forgetting to file a report.

Once again, tools like Mosey can help you track when reports are due and what information needs to be included. By automating these tasks, you’ll reduce the risk of human error and free up time to focus on other aspects of running your business.

Automation won’t solve every compliance issue, but it can minimize the administrative burden of managing multi-state payroll. In client reporting states, it can take some work off the plate of your internal human resources team by notifying them of deadlines and details. That way, you can achieve peace of mind, knowing that nothing will be overlooked.

6. Keep an Eye on Employee Headcounts

One thing that’s often overlooked in payroll compliance is employee headcount. Depending on the number of employees you have, certain states might require additional filings or impose different tax rates.

It’s not just full-time employees you need to worry about, either. On the contrary, part-time workers and contractors can also impact your reporting requirements. For instance, the requirements for state unemployment tax may change when you hit a specific employee threshold.

Let’s look at the state of Massachusetts as an example. If your workforce grows to over 25 employees, you must participate in the state’s Paid Family and Medical Leave (PFML) program. It also requires state unemployment insurance (SUI), with rates determined by your organization’s experience rating. In turn, this rating can be influenced by the size of your workforce.

On top of all that, Massachusetts is a client reporting state if you’re on a PEO. That means you will have to manage these compliance requirements — and track your employee headcount — yourself.

While not all client reporting states have a compliance process as complex as Massachusetts, many still have laws that consider the size of your workforce. if your headcount grows unexpectedly, you might suddenly find yourself responsible for additional reporting obligations that weren’t on your radar before.

The solution? Monitor your employee numbers and be aware of the thresholds in client reporting states. That way, you’ll be prepared for new compliance requirements as your team grows.

7. Don’t Overlook Seasonal Workers

If your business hires seasonal workers during peak times — like the holidays or the summer — be aware that these short-term employees can trigger compliance requirements in certain states. Just because they’re only with you for a few months doesn’t mean you can skip out on payroll reporting.

In many states, even temporary employees must be included in payroll tax filings and unemployment insurance reports. If you’re hiring seasonal workers in different states, you’ll also need to know the specific requirements in each location. Finally, if those states are client reporting, you can’t rely on your PEO to track these variables on your behalf.

The bottom line: Don’t assume that seasonal workers are exempt from compliance obligations. Be sure to include them in your payroll reporting to avoid any penalties down the line.

8. Consider the Cost of Non-Compliance

What happens if you miss a payroll reporting deadline or fail to comply with state regulations? The short answer: It’s going to cost you.

Fines for non-compliance can add up quickly, and in some cases, repeated violations could result in even steeper penalties or legal consequences.

Beyond the financial impact, non-compliance can also lead to audits, which can be time-consuming and stressful for your business. Staying compliant protects your company from these potential costs and ensures you continue operating without interruptions.

What Are the Best Practices for Managing Multi-State Compliance?

Now that you know the essentials of staying compliant with client reporting states, here are a few best practices to keep in mind as your business grows across multiple states:

Already on a PEO and ready to leave?

Download our free guide on transitioning off a PEO that covers all the steps you need for success.

Download free guide

Centralize Your Compliance Information

Keeping all your compliance data in one place makes accessing important information easier for payroll and HR management. This ensures everyone is on the same page and reduces the risk of missing deadlines. It also makes it easier to share information across teams such as HR, finance, and legal.

Regularly Review State Requirements

Since state laws are constantly changing, it’s a good idea to set aside time to review your compliance strategy regularly. That way, you can catch any updates to labor laws before they become an issue.

Assign Responsibility

Make sure that someone on your team is responsible for managing payroll compliance, even on a PEO. You’ll need to keep a closer eye on client reporting states, including any mail or notices from those state agencies sent directly to your company. Whether it’s a dedicated compliance officer or a member of your HR team, a point person adds an extra layer of defense.

Use Compliance Tools

If your business is growing quickly, manually managing compliance can become overwhelming. Investing in tools that automate the process — like Mosey — will save you time and reduce the risk of errors.

If you’re considering transiting off your PEO, Mosey Services can help. You can work directly with our team of compliance pros to complete a PEO transition, including opening new payroll accounts in all 50 states correctly and on time. Avoid payroll interruptions and legal penalties with ease.

Let Mosey Simplify Compliance for You

Handling state and local payroll compliance can be hard to manage, but you don’t have to do it alone. If you’re on a PEO and are struggling to manage your client reporting states, Mosey offers a solution that helps businesses stay compliant with ease.

With a compliance management platform designed to track and manage state-specific payroll requirements, Mosey takes the guesswork out of the process. From monitoring deadlines to filing reports, Mosey ensures you’re always up to date, no matter where your employees are.

Stay on top of your compliance obligations today. Book a free consultation with Mosey to learn more about how we can elevate your business.

The Platform for State and Local Compliance