Withholding Tax Basics

Michigan withholding is required when:

• a Michigan business hires an employee to work in Michigan;
• a Michigan business sends their employee on a temporary work assignment in another state; or
• a business from any other state hires a Michigan resident to work remotely.

For scenarios when Michigan withholding is applicable, see Withholding Reciprocity Examples.

When the Internal Revenue Service (IRS) determines that the relationship between business and worker falls into the employee category (versus independent contractor category), tax must be withheld on the worker’s income (withholding tax). If the IRS requires withholding tax, Michigan requires withholding tax as well. Please reference IRS Publication 15 and Michigan Fact Sheet 155.

Registration for withholding tax is required in Michigan using the business’ Federal Employer Identification Number (FEIN).

Employers can voluntarily withhold for a resident of a reciprocal state if the worker requests withholding.

Withholding is not required on 1099 forms; please follow federal guidelines.

Businesses with independent contractors can voluntarily withhold if the worker requests withholding.