Utah State Tax Commission

Withholding Tax Workshop

Table of Contents

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 means "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.

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:
1. A Utah resident and performs services within or outside Utah, or
2. Not a Utah resident and performs services within Utah.

Obtaining 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.

1. 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?
2. The other method is to complete Form TC-69, Utah State Business and Tax Registration. The form is available:

• On-line 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 obtain a withholding license you must check the box for Employer Withholding License in the Type of Registration section on the form. Then complete sections 1, 3, and 4 . Section 1 is for General Information pertaining to your business entity.

Please note: If you have any other business accounts with the Tax Commission, you need to list them (for example, a sales tax account number E11111). You must then complete sections 1, 3, and 4. Section 1 is for General Information pertaining to your business entity.

All employers must have a federal employer identification number (EIN). If you are a sole proprietor, you must also include your social security number.

Line 1f asks for information on the business entity. When completing lines 1g and 1h , there are two important things to remember:

1. Line 1g—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.
2. If you list a business mailing address on line 1h 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 1i, Business Description. Describe in detail the specific nature of the business and check any applicable boxes if the business is a restaurant.

Line 1j, Officer/Owner Information. Access to the license information will be limited to the individuals or business entities listed on this line. If someone calls the Tax Commission to make an inquiry or resolve a problem associated with the withholding tax license and the individual's name has not been included, the agent will not discuss the license activity with him or her. This is an important security measure to protect your privacy and prevent the unlawful disclosure of information. If you want your accountant or someone else to have the right to make inquiries or resolve problems on behalf of your business, you must provide a power of attorney granting him or her permission to do so.

Section 3, Employer Withholding , is very important. The date you enter will determine when your first withholding tax return must be filed. For example, if you enter a date for 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. For quarterly filers the beginning of a period would be January, April, July, or October. If you start your payroll on the first of January, your first return would be due on April 30, which gives you four months before the first return would be due. Specific reporting periods and corresponding due dates will be discussed in the next step.

Section 4, Authorized Signatures must be completed. If the proper signatures are not entered, the application will be returned.

New Licenses

When an application is received for an employer withholding license, the Tax Commission will issue a license with a six character number consisting of two alpha characters and four digits.

Granting a withholding license is conditional. As noted on form TC-69, applicants or fiduciaries of applicants with a history of filing and paying late are required to resolve past delinquencies. In addition, the Tax Commission may require a bond of at least $25,000, but not more than $500,000, to be posted at the time of application or subsequently to secure the state's assets.

New licenses are usually set up to file returns and make payments quarterly using a quarterly return, TC-96Q. Within 30 days after opening a new withholding license, the employer will receive a withholding coupon payment booklet. A quarterly filer's coupon booklet will contain the following forms:

Quantity	Form Number	Title
4	TC-96Q	Employer's Income Withholding Return
1	TC-96A	Employer's Income Withholding AMENDED Return
1	TC-96	Employer's Income Withholding Annual RECONCILIATION Return
1	TC-96RC	Employer's Income Withholding Annual Corrected Reconciliation Return
1	TC-96C	Employer's Notice of Change

Each of these forms is explained in detail in the Payroll Withholding Example module of this workshop.

Please be sure to use the coupons and returns from the booklet. Each coupon is pre-printed with the tax type, license number, due date, and reporting period.

Seasonal or periodic employers who indicate that they will withhold less than $1,000 for the year meet the criteria to file their return on an annual basis. Annual filers will receive one return per year, a TC-96Y.

Employer's who withhold an average of $1,000 or more each month must file a monthly return. Licenses meeting these criteria will be determined during an annual review of all licenses and will be notified that they are being changed to a monthly filer. A letter will be sent to each employer reporting the change and the date the change will be effective. These employers will receive a new coupon booklet with 12 monthly returns, form TC-96M. When the license is changed, do not use the old coupons to report your withholding.

Quarterly filers who wish to voluntarily change their filing status to a monthly filer to accommodate their record keeping may request the change. The request for the change should be written and sent to the Master File Maintenance Unit of the Tax Commission, 210 North 1950 West, Salt Lake City, UT 84134.

Employers with existing licenses will automatically receive a new withholding coupon booklet each year in January or early February. It is important that you keep the Tax Commission informed of any address changes on form TC-96C. If you move and do not notify us of the address change, the coupon booklet will be sent to the wrong address.

If you do not receive your withholding coupon booklet, contact the Tax Commission at (801) 297-6700 to request a blank return. A blank return may also be obtained from the Tax Commission web site at tax.utah.gov/forms.

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