Utah State Tax Commission
Withholding Tax Workshop
- Section 1 – General Information
Definitions
Employee
An employee is an individual who performs a service for an employer, either within or outside the state of Utah. The nature of the services performed determines the relationship between employer and employee.
Employer
An employer is a person or organization transacting business or deriving income from sources in Utah that has an individual or individuals performing services of any nature on their behalf. The business must control the payment of wages and the behavior of the services performed.
Wages
The State of Utah uses the definition of wages as defined in Internal Revenue Code (IRC), Section 3401. Briefly, wages mean "all remuneration (other than fees paid to a public official) for services performed by an employee for his employer; including cash value of all remuneration (including benefits; i.e., pensions, bonuses, etc.) paid in any medium other than cash..." Wages can include salaries, bonuses, commissions, etc. Refer to IRC, Section 3401 for a detailed definition of wages, and Utah Tax Code Sections 59-10-401, 404, and 405.
Gross (Taxable) Wages
Utah calculates withholding tax based on the same wages as defined by the IRS subject to withholding tax. Unlike the IRS, however, no deduction is made for personal or other allowances calculated on federal form W-4. Utah does allow a withholding allowance credit against the Utah withholding tax calculated on wages (see Withholding Allowance Credit).
Withholding Allowance Credit
A credit against Utah withholding tax is allowed for the withholding allowance(s) claimed on federal form W-4, and for the standard deduction allowed on the individual income tax return. The credit amount for the standard deduction is built into the Utah Withholding Tax Schedules and Tables. The credit for the withholding allowances claimed on federal form W-4 is also built into the Utah Tables, but requires a separate subtraction when using the Utah Schedules. The credit for both the standard deduction and the withholding allowance(s) is phased-out as income increases. Because of this provision, the effective tax rate is less at the lower income ranges and increases to the maximum 5% rate as income increases. See Utah Code Section 49-10-1206.1.
Who Must Withhold Taxes?
An employer must withhold Utah state income tax if the employer:
- Does business in Utah, or receives any income from Utah sources, and
- Pays wages to individuals who perform services for that employer on an employer/employee basis and the individual is:
- A Utah resident and performs services within or outside Utah, or
- Not a Utah resident and performs services within Utah.
Getting a Withholding Tax License
Every employer who pays wages to an employee is required to deduct and withhold Utah income tax from the employee's wages. The employer must establish a withholding tax license account with the Utah State Tax Commission in order to report and remit Utah withholding taxes.
To create a withholding tax license, the business entity may use one of two methods to register the business and obtain a license.
- Register electronically by accessing the state's OneStop Online Business Registration page. Some types of businesses cannot register using the online registration. A list of business types that are not allowed to use the online registration is available at the OneStop Online Business Registration page by clicking on Who can use the online registration system?
- The other method is to complete Form TC-69, Utah State Business and Tax Registration. The form is available:
- Online at: tax.utah.gov/forms
- Through our 24-hour automated forms line 801-297-6700 or 1-800-662-4335 ext. 6700
- At any Tax Commission office
To get a withholding license, you must check the Employer Withholding License box in the Type of Registration section of the form, then complete sections 1, 3, and 4. Section 1 is for General Information on your business entity.
Note: If you have any other business accounts (sales tax, etc.) with the Tax Commission, you must list them by account number before completing the application.
All employers must have a federal employer identification number (EIN). Also include your social security number if you are a sole proprietor.
Line 2a asks for information on the business entity. When completing lines 2g and 2h, there are two important things to remember:
- Line 2g—the DBA (doing business as) address is the physical location of the business or where the business activities are conducted. Be sure to include the local government entity issuing the business license.
- If you list a business mailing address on line 2h that is different from the business location, all mail (return coupon book, notifications of tax code and rule changes, etc.) will go to this address.
Line 2i, Business Description. Describe the specific nature of the business in detail. Check applicable boxes if the business is a restaurant.
Line 2j, Officer/Owner Information. Only the individuals or business entities listed on this line will get access to license information. If someone not listed calls the Tax Commission regarding the withholding tax license, the tax agent will not discuss the license activity with him or her. This security measure protects your privacy and prevents the unlawful disclosure of information. You must provide a power of attorney for your accountant or someone else to have access to your account information.
Section 4, Employer Withholding, Line 4a determines when your first withholding tax return is due. For example, if you enter March 25, your first return will be due on April 30.
It is best to start your payroll at the beginning of a reporting period or month.
Lines 4b and 4c determine how often you must file. See Return Due Dates for filing instructions and deadlines.
Section 4, Authorized Signatures must be completed. Your application will be returned if you do not have the proper signatures.
New Licenses
When you open a withholding account, you will get a license with a 14-character ID (such as 123456-123-WTH).
If you have a history of filing or paying late, you must resolve past delinquencies before getting a license. In addition, you may have to post a bond of $25,000 to $500,000.
You will receive your withholding packet within 30 days after opening your account. Your packet will contain:
- General Instructions
- Return(s) (TC-941)
- Payment coupon(s) (TC-941PC)
- A reconciliation return (TC-941R)
Each of these forms is explained in the Payroll Withholding Example module of this workshop.
Contact the Tax Commission at 801-297-2200 if you do not receive your withholding packet. You may also get blank returns online at tax.utah.gov/forms or by calling 801-297-6700.
Employers with existing licenses will automatically get a new withholding packet at the beginning of each year. Notify the Tax Commission in writing if you change your business. The coupon booklet will be sent to the wrong address if you move and do not notify us.
Accounts are reviewed annually for withholding amounts. You will be notified by mail and sent a new packet of forms if your filing status changes (see Return Due Dates).
