A friend of mine recently posted some job stuff and he had a good observation:
I investigate businesses that pay employees under the table. I ensure that unemployment insurance is paid by the employers, protecting the employees and ensuring they get unemployment insurance if they get laid off (if they get paid under the table they don't get unemployment).
I have been picking up a lot of businesses who are avoiding taxes (surprisingly, or maybe not, software companies are a big issue, along with housecleaners and dog groomers/sitters/walkers).
Emphasis mine.
You know, that's an interesting point and doesn't surprise me much. He does his work in the Seattle area, which is one of the major tech-hubs. And one thing tech-startups are known for is distributed offices. Take a 10 person company with people in 6 different states, no one who has run a company like that before, and you have prime conditions for dropping the ball on unemployment reporting and payment.
So you fired the slacker living in Waukegan, Illinois. Did you report their earnings in Illinois, where they live, Wisconsin, where the shared-office they 'worked' out of was, or Washington State, where HQ is?
aaahhh.... lemme get back to you on that.
As he tells me, that can be a very expensive mistake to make depending on how long the misunderstanding was in place. Your payroll vendor may or may not know WTF they're doing with a startup-style distributed office, so don't rely solely on them. Work location and residential location are different things. You can work in Vancouver, WA but live in Portland, OR; you pay Oregon income taxes, but will earn Washington unemployment if you get laid off.