Arizona Withholding Tax

Basics

For Arizona purposes, an employer must withhold Arizona income tax from the payment of wages to an employee whose compensation is for services performed in Arizona.

Arizona income tax withholding is a percentage of the amount of federal income tax withheld. The employee completes Arizona Form A-4, Employee’s Arizona Withholding Percentage Election, to elect an Arizona withholding percentage.

Amounts that are considered to be wages for federal tax purposes are also considered wages for Arizona income tax and withholding purposes. Amounts that are included in wages and are subject to mandatory federal withholding are subject to mandatory Arizona withholding. Amounts that are excluded from wages and are excluded from mandatory federal withholding are excluded from mandatory Arizona withholding

An employer must withhold Arizona tax from wages paid for services performed within Arizona regardless of whether the employee is a resident or nonresident of Arizona. However, there are two exceptions to the general mandatory withholding requirements for nonresident employees temporarily performing services for their employer in Arizona. Although a nonresident employee may be exempt from Arizona income tax withholding, the employee may be required to file a nonresident Arizona income tax return if the employee meets the filing requirement.

An employer may not have to withhold Arizona tax from wages paid to a nonresident performing services in Arizona if:

• The employee is physically present in Arizona for less than 60 days in a calendar year for the purpose of performing a service that will benefit the employer;

AND

• The employer is an individual, fiduciary, partnership, corporation or limited liability company having property, payroll and sales in Arizona, or of a related entity having more than 50% direct or indirect common ownership.

An explanation of this exemption (including examples) is included in the Employer’s Instructions for the Arizona Form A-4.

Additionally, an employer may not have to withhold Arizona tax from wages paid to a nonresident performing services in Arizona if the individual would be allowed an income tax credit for taxes paid to his or her state of residence under A.R.S. § 43-1096. This exemption applies to nonresident employees who are residents of, or domiciled in, California, Indiana, Oregon, or Virginia. For more information, see Arizona Form WEC.

For more in depth information about Arizona withholding tax, see the following withholding Frequently Asked Questions, tax rulings, brochure and forms.

Arizona Withholding FAQs

Federal Internal Revenue Site calculator

Federal Withholding Information for Individuals

Federal Withholding Information for Businesses

Withholding Tax Rulings

WTR 99-2 - 02/02/99 - Arizona Income Tax Withholding on Pensions or Annuities

WTR 99-1 - 02/02/99 - Arizona Information Return Reporting Requirements

WTR 93-3 - 04/23/93 - Determining Whether a Worker is an Employee or Independent Contractor for Arizona Withholding Tax Purposes

WTR 93-2 - 04/23/93 - Arizona Income Tax Withholding for Baby-Sitters, Governesses and Nannies

WTR 93-1 - 03/29/93 - Arizona's Withholding Requirements Imposed on Employee Benefits

WTR 92-3 - 10/01/92 - Arizona Income Tax Withholding For: I. Nonresident Individuals Working in Arizona II. Resident Individuals Working Outside of Arizona

WTR 92-1 - 04/27/92 - Arizona Withholding Requirements Imposed on Tip Income

Department Publications

Pub 622 Business Basics

Pub 650 Electronic Funds Transfer

Pub 701 Magnetic Media Reporting

Arizona Withholding Tax Forms

A1-E - Employer’s Election to Not Withhold Arizona Taxes in December

A1-QRT - Quarterly Withholding Tax Return

A1-QRT - Quarterly Withholding Tax Return Instructions

A1-WP - Withholding Deposit Coupons

A1-WP - Withholding Deposit Coupons Instructions

A1-R - Arizona Withholding Reconciliation

A1-R - Arizona Withholding Reconciliation Instructions

A1-R EXT - Application for Extension of Time to File A1-R

A1-R EXT - Application for Extension of Time to File A1-R Instructions

A1-APR - Arizona Annual Payment Withholding Tax Return

A1-APR - Arizona Annual Payment Withholding Tax Return Instructions

A1-APR EXT - Application for Extension of Time to File A1-APR

A1-APR EXT - Application for Extension of Time to File A1-APR Instructions

A-4 - Employees Withholding Allowance Certificate

A-4 - Employees Withholding Allowance Certificate Instructions Note: Employee Instructions are included with the A-4 Form

A-4M - Military Election Not to Withhold

A-4P - Annuitant's Request for Arizona Income Tax Withholding

A-4V - Voluntary Withholding Request for Arizona Resident Employed Outside of Arizona

WEC - Withholding Exemption Certificate

WECI - Withholding Exemption Certificate, Native Americans

JT-1 - Business License - Joint Tax Application (New businesses or change of ownership).

For More In Depth Information click here