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Income Tax Rate Change: Withholding Tax

Income Tax Rate Change: Withholding Tax

  • Should I amend 2023 monthly returns because we withheld at the 4.25% rate?

    • 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.
     

  • As an employer or pension administrator, am I required to withhold at the new income tax rate for the remainder of 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. 
     

  • As a software provider, am I required to modify our software to adjust the Michigan withholding tax rate from 4.25% to 4.05%?

    • 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.
     

  • As an employer or pension administrator, I decide to continue withholding at the 4.25% rate, but my employee/pensioner wants their withholding adjusted to 4.05% for the remainder of 2023. What do I do?

    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.

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