Michigan Income Tax Withholding Guide - 2013 printable pdf download

446 (Rev. 10-12)

2013 Michigan Income Tax Withholding Guide

Withholding Rate: 4.25%

Personal Exemption Amount: $3,950

INCOME TAX WITHHOLDING:

Every Michigan employer required to withhold federal income tax under the Internal Revenue Code, must be registered for and

withhold Michigan income tax. Nonproﬁ t organizations that are exempt from income tax, such as charitable, religious and

governmental organizations, must withhold tax from compensation paid to their employees. Employers located outside Michigan

that have employees who work in Michigan must register and withhold Michigan income tax from all employees working in

Michigan.

Beginning January 1, 2012, companies that pay pension and retirement beneﬁ ts are required to withhold Michigan income taxes

on payments to retirees. In general, payers must withhold 4.25 percent on all distributions that are subject to Michigan income tax

unless the payer receives a withholding certiﬁ cate from a retiree. Pension and retirement beneﬁ ts include payments made from a

pension, individual retirement account, annuity, proﬁ t-sharing, stock bonus or other deferred compensation plan. Also included are

annuity payments or endowment or life insurance contract payments issued by a life insurance company.

Nonproﬁ t organizations that are exempt from income tax, such

IMPORTANT INFORMATION

as charitable, religious, and government organizations, must

Withholding Tables on the Web. Withholding rate tables

withhold tax from compensation paid to their employees.

are no longer provided in this publication, but are available at

Employers located outside Michigan who have employees

Treasury’s Web site

working in Michigan must register with Treasury and

Flow-Through Tax Withholding. Beginning January 1,

withhold Michigan income tax from all employees working

2012, payment for ﬂ ow-through withholding tax collected

in Michigan. This applies to both Michigan residents and

should be reported with applicable payments on Michigan

nonresidents (see page 4, “Reciprocal Agreements”).

Flow-Through Withholding Quarterly Return (Form 4917)

Employers located in Michigan assigning a Michigan resident

and annually reconciled on the Michigan Annual Flow-

employee to work temporarily in another state must withhold

Through Withholding Reconciliation Return (Form 4918).

Michigan income tax from compensation paid to the employee

After January 1, 2012, ﬂ ow-through withholding should no

for work done in another state.

longer be included with the taxes reported on the Combined

Who Is an Employee?

Return for Michigan Taxes (Form 160) or on the Annual

Return for Sales, Use and Withholding Taxes (Form 165).

An employee is an individual who performs services for

an employer who controls what will be done and how it will

Flow-through entities (S-corporations, partnerships, limited

be done. It does not matter that the employer permits the

partnerships, limited liability companies, and limited liability

employee considerable discretion and freedom of action, as

partnerships) are required to withhold Michigan income tax

long as the employer has the legal right to control both the

at the individual income tax rate on the distributive share of

method and the result of the services.

taxable business income of nonresident members that are

individuals. A ﬂ ow-through entity with more than $200,000

For further clariﬁ cation of the term “employee,” see the

of business income is also required to withhold Michigan

Federal Employer’s Tax Guide, Circular E.

corporate income tax at the corporate income tax rate (six

Compensation

percent) on the distributive share of the business income of any

The term “compensation,” as used in this guide, covers all

member that is a corporation or another ﬂ ow-through entity.

types of employee compensation including salaries, wages,

Additional information, form access, and updates on the tax

vacation allowances, bonuses, and commissions (as deﬁ ned in

changes for 2013 are available at Treasury’s Web site www.

the Federal Employer’s Tax Guide, Circular E, “Taxable Wages”).

michigan.gov/taxes.

Pension and Retirement Beneﬁ ts

Who Must Withhold?

Under Michigan law, qualifying pension and retirement

Every employer in this State who is required to withhold

beneﬁ ts include most payments that are reported on a

federal income tax under the Internal Revenue Code (IRC)

1099-R for federal tax purposes and included in the retiree’s

must withhold Michigan income tax. Payers of pension and

federal adjusted gross income. This includes deﬁ ned beneﬁ t

retirement beneﬁ ts that will be subject to income tax must

pensions, IRA distributions, and most payments from deﬁ ned

withhold on the taxable amount.

contribution plans. Payments received before the recipient

Who Is an Employer?

could retire under the provisions of the plan or beneﬁ ts

from 401(k), 457, or 403(b) plans attributable to employee

An employer is deﬁ ned in the Federal Employer’s Tax Guide,

contributions alone are not qualifying pension and retirement

Circular E, as any person or organization for whom an

beneﬁ ts under Michigan law and are subject to withholding.

individual performs any service as an employee. This includes

For additional information on pension and retirement beneﬁ ts,

any person or organization paying compensation to a former

visit

employee after termination of his or her employment.

Michigan Income Tax Withholding Guide - 2013

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