Michigan Income Tax Withholding Guide - 2013 Page 4
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4Reciprocal Agreements
Employee Exemptions
Employers located in Michigan must withhold Michigan
MI-W4 Withholding Exemption Certifi cate
income tax from all compensation paid to nonresident
Every employer must obtain a Withholding Exemption
employees for work done in Michigan, unless covered by a
Certifi cate (Form MI-W4) from each employee. The federal
reciprocal agreement.
W-4 cannot be used in place of the MI-W4.
Michigan has entered into reciprocal agreements with the states
Effective October 1, 2012, the exemption amount is $3,950
of Illinois, Indiana, Kentucky, Minnesota, Ohio, and Wisconsin.
per year times the number of personal and dependency
This means that a Michigan employer will not withhold Michigan
exemptions allowed under the IRC. An employee may not
income tax from residents of these states who work in Michigan.
claim more exemptions on the MI-W4 than can be claimed on
Employers in Illinois, Indiana, Kentucky, Minnesota, Ohio, and
the employee’s federal income tax return.
Wisconsin will not withhold their state income tax from Michigan
residents who work in their state. However, such employers may
Michigan has additional special exemptions that are claimed
voluntarily register with Treasury to withhold Michigan income
on a taxpayer’s Michigan income tax return, not on an MI-W4.
tax from Michigan residents who work in their states.
The exemptions on the MI-W4 are limited to the number of
federal exemptions.
Certifi cate of Nonresidency
The MI-W4 enables employees to claim exemption from
Treasury does not furnish nonresidency certifi cates. The employer
Michigan income tax withholding. Employees may claim
may develop a form or obtain a letter from the employee. The
exemption from withholding only if they do not anticipate a
form or letter should contain the employee’s name, legal address,
Michigan income tax liability for the current year because
Social Security number, and a statement signed and dated by the
their employment is less than full-time and the personal and
employee that this is his or her legal address. The employer keeps
dependency exemptions exceed their annual compensation.
the form as its authority not to withhold Michigan income tax.
Any changes made to an MI-W4 makes the form invalid.
Employer Discontinuance
Any writing on the certifi cate other than entries required is
If you go out of business or permanently stop being an
considered a change.
employer, you must do all of the following:
If you receive an invalid certifi cate, do not consider it to
• File a fi nal monthly or quarterly return and pay all money
compute withholding. You must inform the employee who
due within 15 days after you discontinue business.
submitted the certifi cate that it is invalid and require the
employee to submit a corrected MI-W4. If the employee does
• Complete and fi le Form 165 with Treasury by February 28.
not comply, withhold from the employee’s total compensation
Also include the State of Michigan copy of the combined
based on zero exemptions. If a prior valid certifi cate is in effect,
W-2 as furnished to each employee.
continue to withhold in accordance with the prior valid certifi cate.
• Give a combined W-2 to the employee no later than 30 days
Sending Certain MI-W4 Certifi cates
after the last payment of compensation.
• Complete Form 163 and submit to Treasury.
Under Public Act 169 of 1982, employers must submit to
Treasury a copy of any MI-W4 received from employees who:
Records You Must Keep
• Claim ten or more exemptions, or
You must keep all records pertinent to this tax available for
• Claim exempt from withholding tax.
inspection by Treasury. The records are similar to those
necessary for federal income tax withholding as shown in the
Employers must also submit MI-W4s for employees who
Federal Employer’s Tax Guide, Circular E.
change their withholding status to exempt.
Records must show the amounts and dates of all compensation
Employers should not send copies of exemption certifi cates
payments subject to this tax. Include employee name, address,
fi led by:
Social Security number, MI-W4, occupation, and period of
• Part-time or student employees whose expected earnings
employment. Include records that show periods an employee
will be less than their exemption allowance.
was paid by the employer while absent from work due to
• Employees who claim exempt because they live in a
sickness or personal injury. Show the amount and weekly rate
reciprocal state, or
of such payments. Keep duplicates of all returns fi led.
• Employees who claim exempt for a stated time (e.g., two pay
These records must be kept at least six years after the date the
periods).
tax to which they relate becomes due or the date the tax is paid,
Use the offi cial MI-W4 only; do not send copies of the federal
whichever is later.
W-4. Mail MI-W4s only to: New Hire Operations Center, P.O.
Reporting Newly Hired Employees
Box 85010, Lansing, MI 48908-5010
Treasury encourages employers to take advantage of the
If you report your New Hire information magnetically or
online
Internet
reporting
and
information
available
at
electronically, also send a paper copy of the MI-W4 for these
Employers using online reporting will
employees to the New Hire Operations Center. Do not attach
have access to a secure Web site, receive e-mail confi rmations for
MI-W4 forms to the Sales, Use, and Withholding tax return.
new hire submissions, be able to view reporting history online,
Include copies of any written statement or explanation from the
and have access to the New Hire Reporting Form (Form 3281). For
employee supporting the claim made on the MI-W4.
additional New Hire reporting information, call 1-800-524-9846.
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