Arizona Payroll Software- Income Tax Changes

Payroll Processing

Effective Dec 1, 2010 Arizona withholding options have changed. The amounts, on or after Dec 1, 2009 through June 30, 2010, required to be withheld for Arizona withholding purposes will continue to be a percentage of the federal withholding. The new percentage options are available by contacting the Arizona State Revenue Department. Amounts withheld on or after July 1, 2010 must be based on a table prescribed by the department. The department plans to have the new withholding tables available sometime in the late spring of 2011.

All current employees withholding options should be changed to the new applicable rate. Employers must notify their employees of the change and make available the revised Arizona form A-4 or A-4v if employees elect to choose a different rate.

A new employee must complete the revised 2010 Arizona Form A-4 within the first five days of employment to elect an Arizona withholding percentage. If the new employee does not complete the revised Arizona Form A-4, the employer must withhold Arizona income tax from the employee’s wages at the greater of the applicable minimum percentage (11.5% or 21.9%). A new employee who is an Arizona resident working outside of Arizona may elect voluntary Arizona income tax withholding for 2009 by completing the revised Arizona Form A-4V. The employer must withhold Arizona income tax from the employee’s compensation at the greater of either the percentage elected by the employee or the applicable minimum percentage (11.5% or 21.9%).

Tax table updates whether pertaining to state taxes or federal taxes can occur multiple times a year. With the new Arizona payroll taxes, comes the question for employers, how to make this modification easy. Automated payroll software can take the hassle out of tax table updates. Automatically receive updated tax tables when required.

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Lisa Heather, small business owner, provides insightful tips into payroll software. You may also visit Payroll Blog for more payroll information.