by Chad E. Voss
The Indiana Department of Revenue has updated its list of Indiana counties that have adopted income taxes with rate changes for Allen, Blackford, Crawford, Floyd, Howard, Jefferson, Ohio, Pike, Posey, Putnam, Ripley, and Steuben Counties. The county income tax rates are effective for withholding purposes for periods beginning on or after January 1, 2024. (Indiana Departmental Notice No. 1, 01/01/2024.)
County rate changes.
Effective January 1, 2024, Allen County will increase its county income tax rate to 0.0159 (currently, 0.0148), Blackford County will increase its rate to 0.025 (currently, 0.015), Crawford County will increase its rate to 0.0165 (currently, 0.01), Floyd County will increase its rate to 0.0139 (currently, 0.0135), Howard County will increase its rate to 0.0195 (currently, 0.0175), Jefferson County will increase its rate to 0.0103 (currently, 0.009), Ohio County will increase its rate to 0.02 (currently, 0.015), Pike County will increase its rate to 0.012 (currently, 0.0075), Posey County will increase its rate to 0.0145 (currently, 0.0125), Putnam County will increase its rate to 0.023 (currently, 0.021), Ripley County will increase its rate to 0.0238 (currently, 0.0138), and Steuben County will increase its rate to 0.0199 (currently, 0.0179).
Both the county of residence and the county of principal business or employment of an individual are determined on January 1 of the calendar year in which the individual’s taxable year begins. If a person resides in an Indiana county on January 1, or resides out of state on January 1, but has his or her principal place of work or business in an Indiana county as of January 1, he or she is subject to county tax at the rate corresponding to that Indiana county. Certain professional team members and race team members are subject to county tax; withholding for these individuals should be done in a manner consistent with the Department’s notice.
Deduction constant tables.
Deduction constant tables have been developed to help calculate state and county income tax. These tables divide the dollar amount of the exemption/dependent exemption by the number of pay periods; this determines the deduction constant or the dollar amount of the exemption to be deducted each pay period from the employee’s gross income. These tables are provided for regular periodic payments for wages, salaries, and other compensation. For one-time or non-periodic payments, such as a bonus check, withholding should be computed without exemptions.
Table A is used to figure personal exemptions. Table B is used to figure additional dependent exemptions. New for withholding after September 14, 2023, Table B is also used to figure the supplemental first time additional dependent exemption. Table C is used to figure adopted child dependent exemptions.
For withholding after December 31, 2023, the state withholding rate is reduced to 3.05%.
Special rules for certain nonresident employees.
For withholding occurring on or after January 1, 2024, an employer is not required to withhold state or county income tax on some employees if the employee will work in Indiana for 30 days or less during the taxable year. This allowance is not permitted for employees who are professional athletes, professional sports team members, race team members, professional entertainers, and public figures. Additionally, the allowance is not permitted for employees who were, or will become, Indiana residents for any part of the calendar year.
Employers with a time and attendance system where employees are required to record the employee’s out-of-state work location on a contemporaneous basis and that system is used to allocate compensation between states are not required to withhold state and local taxes if the employee is reasonably expected to work in Indiana for 30 days or less during the calendar year. However, if the employee actually works in Indiana for more than 30 days during the calendar year, the employer is required to withhold the tax that otherwise would have been withheld for the first 30 days and withhold on any compensation thereafter. Nevertheless, the employer is permitted to withhold taxes for the first 30 days, provided that the withholding follows the requirements in the notice. Employers who are not certain whether an employee will meet the 30-day threshold can withhold state and county income taxes and the employee can file a return requesting a refund of the taxes withheld if the employee did not meet the 30-day threshold. In addition, if the employee provides a properly completed Form WH-4AFF, the employer is relieved from withholding until the employee has worked in Indiana for more than 30 days during the calendar year. However, if an employee worked previously in Indiana for another employer, any days worked for the previous employer(s) count toward the 30 days.
Employers who have not have not withheld taxes from an employee based on the good-faith assumption that the employee would not work in Indiana for more than 30 days but where the employee in fact works in Indiana for more than 30 days are permitted to increase withholding on that employee in any manner reasonably intended to make up for the tax not previously withheld. An employer increasing withholding due should report the tax withheld for the month in which the withholding actually occurred rather than amending previous months’ withholding returns.
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