Arizona Revised Statute §§ 43-418 and 43-419.
A payroll service company is a person or organization, defined in ARS § 43-418(E)(3), that has custody or control over a client’s monies for the purpose of paying the withheld taxes and filing returns of a client with the Department of Revenue.
A client means another employer for whom the payroll service company provides payroll services for a fee, as defined in ARS § 43-418(E)(1).
No. If your clients file and pay their own returns, you are not a payroll service company as defined by the statute and do not have to register with the Department of Revenue.
In order to be in compliance with the new law, a payroll service company must:
- Electronically register with the Department of Revenue.
- Make payments electronically and file returns electronically with the Department of Revenue.
- Provide an electronic list of clients to the Department of Revenue and update it by the first of every month.
- Be authorized in writing by the client to act on behalf of the client with respect to withholding taxes.
- Keep clients monies, held for payment of state withholding tax or other obligations, in an account separate from the payroll service company’s own funds.
- Timely file all returns and timely make all withholding tax payments required under its contract with its clients.
Yes, if you meet the definition of a payroll service company for purposes of the new statute.
Yes. This registration is in addition to any other business registration required by the Department. However, you may continue to file and pay electronically through your existing login on aztaxes.gov, and you will not be subject to the penalty.
The client list shall include at least the name, address, tax identification number (the client's employer identification number or EIN) and federal deposit frequency of each client. The client's address must be the actual address of the client and not of the payroll service company.
Yes, you can terminate your registration by sending your written request to:
Attn: Signature Card Processing
Arizona Department of Revenue
1600 W. Monroe
Phoenix, AZ 85007-2650
Yes. Failure to file a return electronically will result in a $25 penalty to the payroll service company. Failure to pay electronically will result in a penalty of $25 to the payroll service company. Multiple $25 penalties could apply to the same client on one return. For example, if Client A is required to make four payments in the 3rd quarter, and none of the payments are made electronically, the payroll service company would be subject to four $25 penalties, a total of $100. If the payroll service company files the quarterly reconciliation for Client A by paper, an additional penalty of $25 would apply for a grand total of $125 in penalties assessed toward the payroll service company related to Client A.
Yes, if the failure is due to reasonable cause and not willful neglect. Written request must be in writing and include company name, tax identification number, period(s) requested for abatement and explanation for late file or late pay.
Send request to:
Arizona Department of Revenue
Penalty Review Unit
1600 W. Monroe
Phoenix, AZ 85007
Subsequent to the initial list being sent, only additions and deletions need to be sent to ADOR each month.
Yes. You can continue using EFT ACH Credit process to submit payments but you must register and use one of the two electronic services to submit the quarterly or annual returns.
Basic edit checks, such as the file format, are performed on the file before it is uploaded. If an error is detected the entire file will be rejected.
Once a file is uploaded and an error is detected on a record, the specific record will have to be resubmitted, not the entire file.
Error codes are provided in both the registration/web upload guide as well as the AZFSET guide.
For quarterly filers, the penalty will be imposed beginning with the 2nd quarter 2012 payments and returns. For annual filers, the penalty will be imposed beginning with the annual 2012 return and payment due February 28, 2013.