Idaho has a structured approach to taxing the wages of both resident and nonresident remote employees, characterized by specific employer withholding obligations and sourcing rules.
Employer Withholding Obligations
- Employers are required to withhold income tax from wages paid to employees, which includes remote employees. The Idaho Tax Commission provides tables indicating the amounts to be withheld from employee wages, and employers must remit these withheld amounts to the state on a monthly basis if they meet certain thresholds. Employers must also furnish employees with an annual record of the tax withheld.
Sourcing of Nonresident Wages
- Nonresident wages earned from Idaho sources are taxable in Idaho. According to Idaho law, income is derived from Idaho sources if it results from a business, trade, or occupation conducted within the state or from ownership of certain types of property located in Idaho. Specifically, guaranteed payments to nonresident partners under partnerships are sourced based on the partnership's Idaho apportionment factor.
Reciprocity Agreements and De-minimis Thresholds
- Idaho does not have any reciprocity agreements with other states. This means that nonresidents with Idaho-source income are subject to Idaho tax obligations regardless of their home state's laws. Additionally, there are no specific de-minimis thresholds regarding the number of days worked or the dollar amount of wages earned that exempt nonresident employees from taxation in Idaho.
Local/City Wage Taxes
- Idaho does not impose local or city wage taxes. Employers and employees are only subject to state income tax without additional local income tax burdens.
In summary, Idaho imposes standard withholding obligations on employers for both resident and nonresident remote workers, sources nonresident wages based on the location of the income-generating activities, and maintains a straightforward taxation framework without local wage taxes or reciprocity agreements.