Income Tax Rate Change: Withholding Tax

• No, withholding taxpayers should report and pay the actual tax amounts withheld each tax period.
• If withholding amounts are not adjusted, a reduction in tax liability will be realized in 2024, when individual and fiduciary returns are filed for tax year 2023.

• Treasury takes a neutral position on adjusting withholding amounts based on the income tax rate change.
  • Businesses may choose to continue withholding at 4.25%, per the published withholding tables, or refigure withholding calculations using the reduced 2023 income tax rate of 4.05%.
  • If withholding amounts are not adjusted, employees will receive the adjustment when filing their Michigan income tax return, via a larger refund or less tax owed. 

• Treasury takes a neutral position on adjusting withholding amounts based on the income tax rate change.
  • Software providers may choose to continue withholding at 4.25%, per the published withholding tables, or refigure withholding calculations using the reduced 2023 income tax rate of 4.05%.
  • If withholding amounts are not adjusted, individuals and fiduciaries will receive the adjustment filing their Michigan income tax return, via a larger refund or less tax owed.

Employees may submit a revised MI-W4 to their employer (pension recipients may submit a revised MI-W4P to their pension administrator) directing them to adjust withholding amounts at any time.