In Indiana, it’s important to review your employees’ county tax withholdings at the beginning of each year to ensure that accurate county taxes are withheld with each payroll. Below is a quick review of Indiana county income tax withholding rules:
- Where did the employee reside and work on New Year’s Day? Answers to these questions on Form WH-4 establish an employee’s county tax withholding rate for the entire year (moving from one county to another during the year does not change the county in which taxes are withheld.) Generally, county income tax should be withheld based on each employee’s county of residence on New Year’s Day of each year;
- If an employee resides out-of-state on January 1, 2019, but works in an Indiana county on New Year’s Day, the employee’s county tax withholding should be based on the tax rate for the Indiana county in which the employee works on New Year’s Day. INDIANA NO LONGER HAS SEPARATE COUNTY TAX RATES FOR RESIDENTS AND NON-RESIDENTS. (Indiana county income tax withholding is required even if Indiana state tax is not withheld due to a reciprocity agreement with an adjoining state); and
- If an employee both lives and works outside Indiana on New Year’s Day, they are not subject to county tax for the entire year even if they move to an Indiana county on January 2.
An employer should request a new Indiana Form WH-4 from every employee to be effective January 1, 2020. Make sure AccuPay receives a copy of Form WH-4 for every employee currently on your payroll or that you hire during 2020.
To access the complete list of Indiana county tax rates, click here: County Tax Rate Table.
Increased Indiana County Tax Rates Effective October 1, 2019
The following Indiana counties increased their county income tax rates effective for wages paid on or after October 1, 2019.
- Clay County – 2.35%
- Clinton County – 2.45%
- Dubois County – 1.2%
- Fayette County – 2.57%
- Greene County – 1.95%
- Hancock County – 1.94%
- Hendricks County – 1.7%
- Johnson County – 1.2%
- Ohio County – 1.5%
- Owen County – 1.4%
- Putnam County – 2.1%
- Sullivan County – 1.7%
- Whitley County – 1.6829%
AccuPay’s payroll software will be updated as soon as possible for the October 1, 2019 rate changes.
Contact your AccuPay payroll specialist at 317-885-7600 with any questions concerning employee county income tax withholding.
This blog post has been updated with increased Indiana tax rates as of October 3, 2019.