District of Columbia Withholding laws & HR compliance analysis

District of Columbia Withholding: What you need to know

All District of Columbia employers that are subject to the federal income tax law must withhold District income taxes from wages paid to resident employees. Employers may calculate the amount that must be withheld from employees' paychecks using either the wage bracket tables or the percentage method; detailed information about both methods is available from the Office of Tax and Revenue (OTR).
The term “employer” means employer as defined in Section 3401(d) of the Internal Revenue Code of 1986 and includes any person, firm, or corporation (including organizations that may themselves be exempt from income tax, such as religious organizations), as well as the federal or district governments and any agency, instrumentality, or political subdivision of those governments, employing or using the services of one or more individuals for hire, remuneration, or compensation of any kind.
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District withholding applies to all wages subject to federal withholding. In addition, income tax must be withheld each pay period from wages of certain employees who may be exempt from federal withholding, who have certified that they have no federal tax liability.
Every resident employee must file a Withholding Exemption Certificate, Form D-4, indicating the number of withholding exemptions that are claimed. Employees may file an amended certificate if the number of exemptions increases. An amendment must be filed within 10 days after any decrease in the number of exemptions the employee is eligible to claim. Employees who move from the District to Maryland or Virginia should file a Form D-4A, Certificate of Non-Residence, to end withholding of District taxes.
Employers must obtain a D.C. Business Tax Registration Number by filing Form FR-500 with OTR. Employers must report and deposit withheld amounts on an annual or monthly basis, using Form FR-900A or FR-900M. Form W-2 must be provided to each employee upon termination or by January 31 of the succeeding year, showing the employee's total wages and withheld taxes for the year. By January 31, employers must also file Form FR-900B, Annual Reconciliation and Report of Withholding.

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