This guide covers: what the Work Arrangement field does, how Remote – works from home repoints taxes to the residence state, and the state-registration advisory that follows.
The Work Arrangement field
What it does: Tells the payroll engine how an employee works, which in turn decides whose state the engine uses to source income-tax withholding and state unemployment (SUTA).
Where: On the employee — the new-hire wizard's state/work-location step, and the employee's Edit page. See Add an employee and Edit and manage employees.
The options:
- In-office — the employee works at a company work location. Taxes source from the work location's state.
- Remote – works from home — the employee works from their home. BOTH income-tax withholding AND SUTA follow the employee's residence state, not the company's headquarters/work-location state.
- Hybrid — splits time between home and a work location. Sourcing stays work-location-based (same as In-office).
- Remote – other — remote, but not from the employee's home address (a coworking space, a different site, etc.). Sourcing stays work-location-based.
Who: Accountant or SMB admin.
Notes: Only Remote – works from home moves the work state to the residence state. Hybrid and Remote – other keep work-location sourcing, because the hours aren't being performed at the employee's home.
What Remote – works from home does to taxes
When you set an employee to Remote – works from home, the engine treats the employee's home (residence) state as the state where the work is performed. That drives two things:
- Income-tax withholding — withheld for the residence state instead of the company's location state.
- State unemployment (SUTA) — reported and paid to the residence state.
If the residence state is a different state from your company's work locations, the client now has an obligation in that state. That state appears in Settings → Taxes → State Tax Accounts as a state the client must register for — so you can add the withholding account number and SUTA account number once the client registers.
The non-blocking advisory on payroll runs
Until a withholding and/or SUTA account is on file for the new residence state, payroll runs show a non-blocking advisory flagging that the state still needs a registration/account. It does not stop you from running payroll — it's a reminder to get the client registered so the taxes can be deposited and filed to the right agency. Add the account numbers in Settings → Taxes and the advisory clears.
Related: Add an employee · Edit and manage employees · State income tax explained · Client settings and locations.