Revised February 1, 2007

Utah Withholding Taxes

To learn about all aspects of Utah Withholding Tax, see Pub 14, Withholding Tax Guide.

What is withholding tax?

There are two types of withholding tax in Utah:

  • Income (employee) Withholding
  • Mineral Production (Royalty) Withholding

All employers must withhold from wages paid to employees performing services in Utah and Utah residents working outside Utah. Mineral producers must withhold tax from payments resulting from the production of minerals in Utah.

Who must withhold employee wages?

Any employer making payment (including payments in a medium other than cash) for services performed by an employee must withhold and remit tax according to the laws and rules of the Internal Revenue Code and Utah Tax Code. In order to withhold Utah tax from employees, the employer must obtain a withholding tax license from the Utah State Tax Commission.

Any employer who does business in Utah for 60 days or less during a calendar year may be exempt from withholding tax requirements. The employer must receive advanced approval from the Tax Commission to certify the employer is exempt. Thereafter, if the employer does business exceeding 60 days, the employer is liable for all taxes due during the period of exemption. An additional 30 day exemption may be granted if good cause is shown.

What are wages?

Utah defines wages by the Internal Revenue Code, Section 3401(a) as, "all remuneration for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash."

Federal code specifically exempts the following wages from withholding, but wages may be withheld if the employer and employee agree:

  • Newspaper carriers under age 18 delivering to customers.
  • Newspaper and magazine vendors buying at fixed prices and retaining excess from sales to customers.
  • Household workers.
  • Agriculture workers who are not subject to FICA withholding.
  • Ordained ministers for compensation earned in the performance of their services as a minister.
  • Amounts paid for casual employment (less than $50 paid and less than 24 days worked in that quarter or in the preceding quarter).
    1. Must be for work not in the employer's line of business.
    2. Does not apply to corporations.
  • Cash or non-cash tips of less than $20 per month.
  • Moving expenses.
  • Certain employer contributions to IRAs and deferred compensation plans.
  • Individuals not working in the course of the employer's business (subject to the casual labor rules above).
  • Employees of foreign governments and international organizations.
  • Armed forces personnel serving in a combat zone.
  • Foreign earned income, if an exclusion from gross income.
  • Members of a religious order performing services for the order or associated institution.
  • Other benefits provided by the employer if it is reasonable to believe that the employee can deduct those amounts from taxable income under a separate section of the code.

What is the difference between an employee and an independent contractor?

The right to control and the relationship of the parties are primary factors that determine whether a worker is an independent contractor or an employee. The relevant facts used to make the determination fall into three main categories. It is very important that you consider the facts in all categories before making a determination.

1. Behavioral Control

These facts show whether there is a right to direct and control how the worker does the work. For example:

  • Instructions - If the worker receives extensive instructions on how the work is to be done, employee status is indicated.
    • how, who, or where to do the work
    • what tools or equipment to use
    • what assistants to hire to help with the work
    • where to purchase supplies and services
  • Training - If the worker receives training about required procedures and methods, this indicates that the business wants the work done in a certain way, and this suggests employee status.

2. Financial Control

These facts show whether there is a right to direct or control the business part of the work. For example:

  • Significant Investment - If the worker has a significant investment, the worker may be a independent contractor. While there is no precise dollar test, the investment must have substance. However, a significant investment is not necessary to be an independent contractor.
  • Expenses - If the worker is not reimbursed for some or all business expenses, then the worker may be an independent contractor, especially if the worker's unreimbursed expenses are high.
  • Opportunity for Profit or Loss - If the worker can realize a profit or incur a loss, this suggests that the worker is in business for him or herself and that the worker may be an independent contractor.

3. Relationship of the Parties

These are facts that illustrate how the business and the worker perceive their relationship. For example:

  • Employee Benefits - If the worker receives benefits, such as insurance, pension, or paid leave, this is an indication that the worker may be an employee. If the worker does not receive benefits, however, the worker could be either an employee or an independent contractor.
  • Written Contracts - A written contract may show what both the worker and the business intend. This may be very significant if it is difficult, if not impossible, to determine status based on other facts.

For additional information, refer to IRS Publication 1779, Independent Contractor or Employee.

How do I get a Utah Withholding Tax License?

There is no fee to obtain a withholding tax account. However, granting a withholding license is conditional. Applicants with a history of filing and/or paying Utah taxes late will be required to pay any tax delinquency and may be required to post a surety bond.

I am a sole proprietor. Do I still need to obtain a federal Employer Identification Number (EIN)?

What are the withholding tax filing requirements?

  • Quarterly filing status is automatic unless you request otherwise or withhold $1,000 or more per month
  • Monthly filing is required if you withhold $1,000 or more per month
  • Annual filing is available if you:
    • report household employment taxes on Schedule H of your federal income tax return (federal Form 1040), or
    • you withhold less than $1,000 in a calendar year

Electronic Funds Transfer (EFT) is available for making tax payment for withholding tax accounts. EFT is not required and is a voluntary method of payment. Taxpayers who choose to make payments via EFT do not submit paper return coupons.

An application form must be completed and approved to remit withholding tax payments via EFT. Applications, procedures, and transfer formatting requirements are coordinated through the Electronic Data Specialist of the Tax Commission. To inquire about EFT payments, phone (801) 297-7626. For payments by EFT, complete the authorization form found in Pub 43, Withholding Tax EFT.

Employers who submit paper return coupons may use the online PaymentExpress system for making tax payments. Please note that this is a payment portal only and you must still submit the tax return for the filing period. Payment for amounts due may be made online by direct debit (electronic check) against a checking account or savings account, or by credit card using the PaymentExpress system. A convenience fee is assessed for electronic payments; a complete list of convenience fee amount is available in the PaymentExpress FAQs.

What form should I use to file my employee withholding tax?

The Tax Commission requires filing on preprinted return forms. You will receive a set of return coupons by the beginning of each calendar year.

If you change your account number, do not use the preprinted forms with your old account number. If you need the Tax Commission to send forms to you, call our automated service line (801) 297-2200 or 1-(800) 662-4335. The following forms are used for employee withholding tax:

  • TC-96 M - Monthly Income Withholding Return
  • TC-96 Q - Quarterly Income Withholding Return
  • TC-96 Y - Annual Income Withholding Return
  • TC-96 A - Amended Income Withholding Return to report overpayments and refund claims.
  • TC-96 C - Utah Employer's Notice of Change to notify the Tax Commission of any changes in your business name, address, mailing address, or ownership status; or to close the account.
  • TC-96 R - Annual Withholding Reconciliation Return
  • TC-96 RC - Corrected Annual Withholding Reconciliation Return

How do I reconcile our withholding taxes and file W-2s with Utah?

Employers must reconcile their withholding taxes each year and provide copies of all W-2, 1099 or TC-675R forms issued with Utah taxes withheld must also be submitted to the Utah State Tax Commission. The annual reconciliation report is due on February 28 when filed on paper, or March 31 if filed electronically. If a due date falls on a weekend or holiday, the return is due on the next business day

Employers use form TC-96R to reconcile their withholding taxes and follow the instructions provided in Publication 32, Annual Reporting of Forms W-2, W-2C, 1099-R & TC-675R. Taxpayers filing electronically use the W-2 Online File Transfer system to file their TC-96R and W-2 forms with Utah.

Tell me about Voluntary Withholding Agreements (Civil Service Annuity).

You are not required to contact the state to initiate state withholding on your civil service annuity. The federal Office of Personnel Management (OPM) has established an automated service, called "Annuitant Express." To start, stop or change the amount of federal and state withholding, taxpayers may call "Annuitant Express" at 1-800-409-6528.

Retirement income administered by OPM and any withholding on that income is reported annually to the recipient for income tax purposes on form 1099R (formerly form W-2P).

What resources are available to me?

For more information, contact the Taxpayer Services Division of the Utah State Tax Commission at (801) 297-2200 or toll free at 1-800-662-4335.

You can attend a free Small Business Employer/Withholding Workshop or review the Withholding Tax Online Workshop.

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