Comprehensive Guide: Understanding Employee Withholding by State

As an employer, you have a million and one tasks to take care of. One of these oh-so-important responsibilities is withholding payroll taxes from employee wages. And, your job doesn’t stop there. You also need to fill out and remit certain withholding forms to your state. Get to know all about employee withholding by state.

Employee withholding recap

Employers are responsible for calculating, withholding, and remitting certain employment and payroll taxes. So, which taxes do you need to calculate and withhold from your employees’ paychecks? Well, it depends on your state. However, here’s a list for quick reference:

Federal income tax (FIT): Amount varies based on Form W-4 information
State income tax (SIT): Varies by state (some states do not have state income tax)
Local income tax: Varies by state and locality
FICA tax: 6.2% for Social Security tax and 1.45% for Medicare tax
SUI(state unemployment) tax: Only applies to employees in Alaska, New Jersey, and Pennsylvania
State-specific taxes: Varies by state

Keep in mind that each employee’s taxes will vary depending on certain factors, like wages and marital status. And, the information employees fill out on Form W-4, and a state W-4 form (if applicable) can impact their withholding.

Although it’s not very common, some employees may also be exempt from certain taxes. If an employee is exempt, do not withhold the applicable taxes from their wages.

Type of Tax	What Is it?
Federal Income Tax	Federal income tax is an employee-only tax that depends on the employee’s pay frequency, Form W-4 information, and earnings.
State Income Tax	State income tax applies to employee wages in certain states. Rates can either be flat (e.g., standard percentage) or progressive (e.g., wage brackets).
Local Income Tax	Local income tax is a type of tax some local governments impose on people who live or work in a specific area. This is separate from FIT and SIT.
FICA Tax	FICA tax includes both Social Security and Medicare taxes. The employee and employer split FICA tax.
SUI Tax	State unemployment tax is a percentage of employee wages and varies depending on the state. Only three states require employees to contribute to SUI (Alaska, New Jersey, and Pennsylvania).
State-specific Tax	State-specific taxes include any tax that is unique to a state, such as Oregon Transit Tax.

Before running payroll for employees, make sure you know which taxes to withhold from employee wages and the withholding forms you must file. That way, you can avoid any penalties and issues down the road.

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Employee withholding by state: Chart

Along with withholding taxes from employees’ paychecks comes withholding forms. And depending on your state, you may have a few to keep on your radar.

Need to know what taxes to withhold from employee wages and which employee withholding forms to file? We have your back with our employee withholding and forms by state chart.

State	Taxes to Withhold from Employee Wages	State-specific Withholding Forms for Employers
Alabama	FIT SIT Local income taxes, if applicable FICA taxes	Form A-6, Employer’s Monthly Return of Income Tax Withheld

Form A-1, Employer’s Quarterly Return of Income Tax Withheld

A1-T, Withholding Transmittal of Wage and Tax Statements

G-1003, Withholding Income Statement Transmittal

G-7M, Withholding Quarterly Return (For Monthly Payer)

HW-14/VP-1, Hawaii Withholding Tax Return

KW-5, Withholding Tax Deposit Report

K-3, Employer’s Return of Income Tax Withheld for Annual Filers (mailed)

K-3E, Kentucky Annual EFT Withholding Reconciliation (mailed)

L-1, First Quarter Employer’s Return of Louisiana Withholding Tax

W-3ME, Annual Reconciliation of Income Tax Withheld

5080, Sales, Use and Withholding Taxes Monthly/Quarterly Return

CF-941, City of Michigan Common Income Tax Withheld Quarterly Return

Minnesota Quarterly Withholding Worksheet for annual filers*

W-3N, Nebraska Reconciliation of Income Tax Withheld Form

NC-3, Annual Withholding Reconciliation

IT-501, Ohio Income Tax Withheld Deposit Payment

OR OQ, Oregon Quarterly Tax Report

OR-STT-1, Oregon Quarterly Statewide Transit Tax Withholding Return

OR-STT-2, Statewide Transit Tax Employee Detail Report

REV-1667, Pennsylvania Annual Withholding Reconciliation

LCLREC, Local Annual Withholding Reconciliation

WHT-434, Vermont Annual Withholding Reconciliation

State income tax withholding forms

Keep in mind that forms can vary by state and locality. To ensure you file all of the necessary forms, you can:

Do your research
Work with an accountant
Use full-service payroll software (that way, you don’t have to worry about the forms!)

Another thing to keep in mind is that forms can change from year to year. So, be sure to stay on top of which forms your state requires and if there are any changes. That way, you can stay compliant.

Need an easy way to calculate employee withholdings? Patriot’s fast and affordable payroll software makes it a breeze to pay employees with a simple three-step process. And, if you opt for our full-service payroll software, we’ll collect, file, and deposit your payroll taxes for you (woohoo!). Try it free today!

This is not intended as legal advice; for more information, please click here.