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Filing and Payments FAQs - Employer Withholding Tax

1. Who must withhold? 

a. Every employer that has a location in the City of Detroit, or is doing business in the City
    of Detroit, even if it has no location in the City of Detroit, is required to withhold income
    tax for its employees.

b. An employer has a withholding obligation if it has employees who work remotely
    (telecommute) from a location in Detroit.

c. If an employer, that does not otherwise have an obligation to withhold, voluntarily
    registers to withhold, the employer must withhold from all employees who are residents
    of Detroit.

Note: An employer is any individual partnership, association, corporation, non-profit organization, governmental body or unit or agency, or any other entity that employs one or more persons on a salary, bonus, wage, commission or other basis whether or not the employer is in a business.

2. When are my monthly or quarterly returns due? 

Monthly returns are due on the 15th day of the month following the month in which the tax was withheld.

Quarterly returns are due on the 15th day of the month following each quarter.

If the 15th falls on a holiday or weekend, the return is due on the next business day.

3. How do I know if I should file monthly or quarterly? 

Employers are required to file monthly if their annual withholding amount is $1,200 or more per year.  Employers withholding $1,199 or less should file on a quarterly basis.

4. When is my annual return due? 

City of Detroit Income Tax Withholding Annual Reconciliation, is due on February 28. There is no extension to file available for this form.

Visit the Employer Withholding Tax Forms page to select Form 5321 for the appropriate tax year.
 

5. If I filed all my monthly or quarterly returns, do I still need to file an annual return? 

Yes, all employers registered for city income tax withholding are required to file Form 5321, City of Detroit Income Tax Withholding Annual Reconciliation, each year, even if no tax is due.

Visit the Employer Withholding Tax Forms page to select Form 5321 for the appropriate tax year.

6. If my monthly or quarterly return is zero, do I still need to file it? 

Yes, a return must be filed even if there is no tax liability for the period.

7. Will I be charged a late penalty if I pay my monthly or quarterly return after the due date? 

Yes, if submitting a payment after the due date, include the calculated penalty and interest in the payment amount. If penalty and interest is not included, you may receive a bill for any additional amount due. 

8. I am a non-profit, do I need to withhold for my employees? 

Yes, a non-profit organization in the City of Detroit is required to withhold income tax from its employees. Visit the Employer Withholding Tax Forms page to select the appropriate tax year.

9. What type of compensation do I have to withhold from? 

City of Detroit income tax must be withheld from:

  • All compensation (salaries, wages, commissions, severance pay, bonuses, etc.) of a City of Detroit resident for services rendered or work performed regardless of whether such services or work are performed in or out of the city; and
  • All compensation of a nonresident for services rendered or work performed in the City of Detroit where the City of Detroit is the predominant place of employment.

Vacation, holiday, sick, severance and bonus pay to nonresidents who perform part but not all of their work or services in the City of Detroit are taxable in the same ration as their normal activities.

Example: A nonresident employee who is subject to withholding on 60% of their earnings, because 60% of their work is performed in the City of Detroit, is also subject to withholding on 60% of their vacation, holiday, sick pay, severance pay, bonus pay or wage payments during periods of sickness.

10. What type of compensation is not subject to withholding? 

Withholding does not apply to:

  • Wages paid to domestic help;
  • Fees paid to independent contractors who are not employees;
  • Payment to a nonresident employee for work or services performed in the City of Detroit, if the predominant place of employment is not the City of Detroit;
  • Payment to a nonresident employee for work or services rendered outside of Detroit;
  • Pensions and annuities, worker's compensation and similar benefits;
  • Amount paid for sickness, personal injury or disability to the same extent that these amounts are exempt from federal income tax, but the employer must withhold from such payments if federal tax is withheld.
  • Amounts paid to an employee as reimbursement for expenses incurred in performing services.

11. Where do I send my monthly/quarterly returns and any applicable payment?   

Michigan Department of Treasury
P.O. Box 30812
Lansing, MI 48909

To ensure proper application of the payment, please follow all instructions provided on the return.

12. Where do I send my annual reconciliation return and any applicable payment? 

Michigan Department of Treasury
P.O. Box 30812
Lansing, MI 48909

To ensure proper application of the payment, please follow all instructions provided on the return.

13. How do I amend my monthly/quarterly return? 

Monthly/quarterly returns cannot be amended. 

14. How do I register for City of Detroit Withholding Tax? 

As long as the business is registered for State of Michigan taxes there is no separate registration process for City of Detroit withholding. Submit returns using the Federal Employer Identification Number.

If the business is not registered for Michigan taxes but is required to do so, contact the State of Michigan Registration Department at 517-636-6925.

15. How do I discontinue City of Detroit Withholding Tax?

Sale or Discontinuance: An employer who sells, goes out of business or permanently cease to be an employer must file Form W-2 and a City of Detroit Income Tax Withholding Annual Reconciliation (Form 5321) by the date the final withholding payment is due. You must indicate within Form 5321 the Date and Reason Code for Discontinuance. Do notuse City of Detroit Notice of Change (Form 5439) to report a sale or discontinuance.

16. How do I correct errors on my City Income Tax Withholding Monthly/Quarterly Return (Form 5323)? 

Employer's errors of over or under withholding should be corrected as follows: 

  • If an error is discovered in the same period (month or quarter) in which it was made, the employer shall make the necessary adjustment in a subsequent payment. Only the corrected amount should be included in the return to the city;
  • If an error is discovered in a subsequent period of the same calendar year, the employer shall make the necessary adjustment on a subsequent payment and report it as an adjustment on the next return;
  • If an error is discovered in the following calendar year, the employer shall notify the City Income Tax Division of the Michigan Department of Treasury of the error by filing an amended Form 5321 including corrected W-2 Forms (W-2C), if applicable, and:

- Pay any additional tax due; or 

- Make a written request for refund of an overpayment including a specific explanation of the error.

NOTE: Overpayments of withholding will not be credited toward tax due in future years.

For additional information visit the Employer Withholding Tax forms page to view the City of Detroit Income Tax Withholding Guide (Form 5469) for the appropriate tax year.

17.  How do I correct withholding too much/too little from an employee's pay? 

If an error has occurred in the same tax year, see answer to "How do I correct errors on my City Income Tax Withholding Monthly/Quarterly Return (Form 5323)?"

If an error has been discovered after the City of Detroit Income Tax Withholding Annual Reconciliation (Form 5321) has been filed, the employee will reconcile their annual withholding with the submission of their City Individual Income Tax Return. Any overpayment will be refunded and any determined liability with be the responsibility of the employee.