Search Results for: tax withholding
Navigate the challenges of state tax withholding for remote employees with our comprehensive guide, ensuring compliance amid the rapid growth of remote work.
Employers who have employees working in a large number of states have to manage a number of complexities to ensure tax withholding compliance. Employee Tax Withholding Allowances Over 40 states in the U.S. collect state income tax directly from workers’ paychecks. The Form W-4, used to determine the amount of tax to withhold, underwent significant changes in 2020, leading many states to develop their own forms or adjust their tax tables. Not all workers need to submit a new state form, but it’s recommended to check the state tax agency website for more information. Employer Responsibilities Employers must maintain federal and state tax forms for each worker. If a worker doesn’t provide a complete, signed federal Form W-4, the employer must withhold federal income tax as if the worker were single or married filing separately. Most states follow the same rule for state income tax. Exemptions Some workers may claim exemption from federal and state income tax withholding. Each state has its own rules about exemption from state income tax and the form a worker must file to support the exemption. Nonresident Military Spouses The federal Military Spouses Residency Relief Act (MSRRA) allows a servicemember’s spouse to designate a different state as their domicile and pay taxes to that state. The Veterans Benefits and Transitions Act of 2018 (VBTA) modified the law to allow spouses of servicemembers to choose to use the servicemember’s domicile for state taxation, irrespective of the marriage date. Recordkeeping Requirements Most state income tax withholding laws have similar recordkeeping requirements to those of the IRS for federal income tax withholding. These requirements typically include keeping track of returns and statements filed with the state revenue agency, dates and amounts of tax deposits, the total number of employees subject to withholding, and more. Compliance in these areas is crucial to avoid potential penalties and ensure accurate tax withholding. Employers should stay updated on changes to tax laws and forms, maintain thorough records, and ensure they’re withholding the correct amount of tax for each employee. It’s also important to respect exemptions and understand the specific rules for nonresident military spouses. By doing so, employers can ensure they’re meeting their legal obligations and providing accurate information to their employees. Here are some recent legislative updates regarding tax withholding that employers should be informed about. Updates effective 7/1/2024 Georgia G-4 Form Update: The state of Georgia has released an updated version of the Georgia G-4 form. The update specifically affects Line H, where the value has been increased from $3,000 to $4,000. This change is effective from July 1, 2024. For more details, please refer to the official form. Learn more Addition of Blanchester Village, Ohio: Effective from July 1, 2024, Blanchester Village in Ohio has been added. For more information about this update, please visit the official page. Learn more Addition of College Corner Village, Ohio: College Corner Village in Ohio has been added effective from July 1, 2024. More details can be found on the official page. Learn more Addition of Glenmont Village, Ohio: Glenmont Village in Ohio has been added effective from July 1, 2024. For more information, please visit the official page. Learn more Addition of Holmesville Village, Ohio: Holmesville Village in Ohio has been added effective from July 1, 2024. More details can be found on the official page. Learn more Vermont Child Care Contribution Tax: The state of Vermont has added the Child Care Contribution tax effective from July 1, 2024. For more information about this new tax, please refer to the official document. Learn more Please note that it’s always a good idea to consult with a tax professional or the respective tax authorities for the most accurate and up-to-date information.
Stay compliant with state tax withholding rules for your multistate workforce. Learn the ins and outs of tax withholding with Experian Employer Services.
Are you managing tax withholding for a single employee working in multiple states? Get expert guidance from Experian Employer Services to stay compliant.
Understanding the differences between employer tax withholding and tax filing is key to compliance and delivering a high quality employee experience.
These key concepts of multistate payroll tax withholding can help your business stay compliant with regulations in different jurisdictions.
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Form 945, Annual Return of Withheld Federal Income Tax, is the cornerstone for reporting all “nonpayroll’ withheld taxes. Nonpayroll taxes encompass amounts withheld from various sources, including gambling winnings, retirement pay for service in the U.S. Armed Forces, pensions, annuities, IRAs, and certain other deferred income, and backup withholding concerning reportable payments. All income tax withholding reported on Forms 1099 or Form W-2G must be reported on Form 945. Form 945 may also be used to report backup withholding for compensation paid to H-2A visa holders who fail to furnish their taxpayer identification number. Who Must File Employers who withhold or are required to withhold federal income tax (including backup withholding) from nonpayroll payments must file Form 945. If an employer doesn't have a nonpayroll tax liability for a specific year, they are not required to file Form 945. Form 945 should not be used to report withholding required to be reported on Form 1042, the Annual Withholding Tax Return for U.S. Source Income of Foreign Persons. Form 945A Form 945A, Annual Record of Federal Tax Liability, serves as a daily log of federal tax obligations. Semiweekly and next-day depositors must complete and attach Form 945A to Form 945. Monthly depositors need not complete Form 945A unless they accrue a one-day tax liability of $100,000 or more, in which case they become semiweekly depositors for the remainder of the year. Facsimile Signature Corporate officers or duly authorized agents may sign Form 945 by rubber stamp, mechanical device, or computer software program. IRS Unveils Draft Instructions for the 2023 Annual Withholding Return In the ever-evolving landscape of tax regulations, businesses must stay ahead of the curve. The IRS has given us a glimpse into what the upcoming tax year holds with the release of the draft instructions for the 2023 Form 945, the Annual Return of Withheld Federal Income Tax. Let's delve into the specifics to ensure you're well-prepared for your tax obligations in the coming year. A Closer Look at the Form 945 Updates At its core, Form 945 serves as the linchpin for businesses, allowing them to report federal income tax withheld from nonpayroll payments. If you're an employer who withholds federal income tax, including backup withholding, from nonpayroll sources like pensions, military retirement, gambling winnings, specific government payments, or those subject to backup withholding, Form 945 is your annual record-keeper. It consolidates all federal income tax withholdings from these nonpayroll avenues into one comprehensive document. The filing deadline for the 2023 Form 945 is January 31, 2024. However, the IRS has shown understanding for diligent businesses. If you've consistently met your tax obligations throughout the year by making timely deposits, you gain a little breathing room. In this case, the deadline extends to February 12, 2024, providing you with a few extra days to ensure your records are in order. (Remember, the extension to February 12 is due to February 10 falling on a Saturday.) Filing Methods Demystified While the IRS strongly advocates for electronic filing due to its efficiency and speed, they recognize that some businesses still prefer the traditional paper route. If you're one of them, the method you choose depends on whether a payment accompanies Form 945. The details, including specific mailing addresses, can be found in the Form 945 instructions. The good news? These addresses remain unchanged, providing a familiar path for those accustomed to the paper trail. Addressing Errors with Form 945-X We're all human, and mistakes happen. If you find an error on a previously filed Form 945, fear not. The solution lies in Form 945-X, also known as the Adjusted Annual Return of Withheld Federal Income Tax or Claim for Refund. When errors rear their heads, this form allows you to make necessary corrections. It's crucial to note that Form 945-X is filed separately from the regular Form 945, ensuring clarity and accuracy in your tax records. Embracing Electronic Fund Deposits In our digital age, electronic transactions have become the norm, and federal tax deposits are no exception. Employers are mandated to utilize electronic funds transfer (EFT) for all federal tax deposits. The preferred method? Electronic Federal Tax Payment System (EFTPS) stands as the cornerstone of EFT. However, if EFTPS doesn't align with your preferences, alternatives exist. Businesses can delegate this responsibility to tax professionals, financial institutions, payroll services, or other trusted third parties. These entities can ensure your electronic deposits are made promptly and accurately. Peering into the Future As businesses, we thrive on foresight. The IRS granted us a glimpse into the future with the draft release of the 2023 Form 945 in June. While the final version has yet to see the light of day, this draft version equips businesses with invaluable insights. By familiarizing yourself with the draft instructions, you can prepare your financial records and processes for the year ahead, ensuring a smooth tax season. The IRS released a draft of the 2023 Form 945 in June. A final version has not yet been released.
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