Arizona employers, you could know that Senate Invoice 1828 considerably diminished the state’s earnings taxes beginning with the 2022 tax yr. However did you additionally know that it requires employer motion for the 2023 tax yr? You could now give all workers—not simply new hires—a brand new AZ state earnings tax type.
Learn on to study modifications to AZ state withholding and what that you must do.
AZ state withholding overview
Like most states, Arizona has a state earnings tax. Employers withhold state earnings taxes from worker wages. To find out how a lot to withhold, new hires should fill out the state W-4 type. Arizona’s W-4 type is Type A-4.
Distribute Arizona Type A-4, Worker’s Arizona Withholding Election, to new hires. Withhold state earnings tax in line with the knowledge workers enter.
Staff enter the next info on Type A-4:
- Title
- Social Safety quantity
- Handle
- State earnings tax charge
- Withholding exemption, if relevant
- Extra withholding, if desired
Usually, solely new workers and workers who wish to change their withholding quantities full a brand new state W-4 type. Nevertheless, the 2023 AZ state earnings tax type is an exception.
New 2023 AZ state earnings tax type
In 2021, the Arizona Legislature handed Senate Invoice 1828, which diminished Arizona’s particular person earnings tax charges starting within the 2022 tax yr. And starting in 2023, Arizona will change its earnings tax construction to a flat tax charge of two.5%.
Because of these modifications, the withholding charges on prior types are not consultant of the decrease earnings tax charges.
The 2023 Arizona Type A-4 has been up to date to replicate Arizona’s decrease particular person earnings tax charge. Right here’s what meaning for employers and workers.
How do the 2022 and 2023 tax charges on Type A-4 examine?
Once more, Arizona up to date Type A-4 to replicate the decrease particular person earnings tax charge. You may examine the tax withholding choices between the 2022 and 2023 variations on the chart beneath.
| 2022 Type A-4 Tax Charges | 2023 Type A-4 Tax Charges |
|---|---|
| 0.8% | 0.5% |
| 1.3% | 1.0% |
| 1.8% | 1.5% |
| 2.7% | 2.0% |
| 3.6% | 2.5% |
| 4.2% | 3.0% |
| 5.1% | 3.5% |
Staff can nonetheless declare exemption from state earnings tax or request further AZ earnings tax withholding on the brand new A-4 type.
What do employers must do?
Arizona employers should make the brand new type obtainable to all workers by January 31, 2023. This contains your present workers who’ve already stuffed out a state W-4 type.
Acquire accomplished new A-4 types and maintain them in your workers’ recordsdata. Like several state W-4 type, don’t remit the types to the Arizona Division of Income.
You may get the brand new Arizona Type A-4 on the state’s web site right here.
What occurs if workers don’t fill out the shape?
Staff who don’t fill out the brand new AZ state earnings tax type have a default withholding charge of two.0%. Replace your data and payroll to replicate this 2.0% charge.
New A-4 recap
Don’t neglect your employer tasks. Evaluation the next info to assist keep up-to-date with the brand new A-4 type:
- Starting in 2023, Arizona may have a flat tax charge of two.5%
- Employers should make the 2023 A-4 type obtainable to all workers no later than January 31, 2023
- The seven new charges on the 2023 A-4 type are 0.5%, 1.0%, 1.5%, 2.0%, 2.5%, 3.0%, and three.5%
- Staff can nonetheless declare exemption from state earnings tax on the brand new A-4 type
- Staff can nonetheless request further AZ earnings tax withholding on the brand new A-4 type
- If workers don’t fill out the brand new type, withhold the AZ default withholding charge of two.0%
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