Indiana Withholding laws & HR compliance analysis

Indiana Withholding: What you need to know

Indiana income tax regulations require all employers in the state that withhold federal income tax to withhold state income taxes from resident and nonresident employees who perform services in Indiana.
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Employers required by the Internal Revenue Service to withhold income tax on wages must register with the Indiana Department of Revenue (DOR) as a “withholding agent” by filing a Business Tax Application (BT-1) online through INBiz (http://inbiz.in.gov). Once registered, an employer will receive an Indiana Taxpayer Identification Number.
As a result of an agreement with some other states, Indiana employers are not required to withhold Indiana state taxes from wages paid to residents of Kentucky, Michigan, Ohio, Pennsylvania, and Wisconsin. This exemption does not apply to county withholding. Employees must submit Form WH-47 certifying their state of residency to the employer.
Every employer that withholds wages under the state income tax law is also required to withhold the appropriate county adjusted gross income tax.
Taxes must be withheld on all payments to employees that are subject to federal withholding, including wages, salaries, fees, commissions, tips, and bonuses.
Casual laborers, some domestic employees, ministers, and those who receive pension annuities may choose not to have tax withheld from their earnings. However, their income is still subject to state and county tax.
Withholding rates. DOR Notice #1 explains how to withhold taxes on employees. The county tax rate will depend on where the employee resided as of January 1. If an employee resides out of state on January 1 but has his or her principal place of work or business in an Indiana county, the ...

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