Arizona's Tax Withholding Rules
- All Arizona employees must fill out Form A4 at the time of hire. Employees claim personal exemptions to state tax withholding on this form; in addition, employees may request that their employers withhold an additional amount of state taxes each pay period. In December 2010, Arizona lowered its withholding rates; employees desiring to take advantage of lower withholding rates or new rules on exemptions had to fill out a new Form A4 for changes to take effect.
- Arizona employers must withhold state and federal taxes from each employee's gross taxable wages. Gross taxable wages are the total amount the employee earns each pay period, minus pre-tax deductions such as contributions to health care or retirement plans. The Arizona gross taxable wage must be the same as the federal gross taxable wage; Arizona cannot tax a different amount of the employee's earnings than the federal government does.
- In most cases, Arizona employers must withhold taxes from all employees, regardless of whether the employee lives in Arizona. However, Arizona employers cannot withhold taxes from employees who are temporarily in Arizona to perform a service if the employee is in Arizona for fewer than 60 days and the employer is based in Arizona. In addition, Arizona employers must not withhold taxes for non-resident employees who live in a reciprocal state and work in Arizona. As of December 2010, Virginia, California, Indiana and Oregon are reciprocal states.
- If an employee is the spouse of a service member stationed in Arizona, he can claim an exemption from Arizona tax withholding rules if he is only in Arizona because his spouse is stationed there and maintains a residence in another state. Spouses of service members cannot claim this exemption if they do not live elsewhere or if they intend to settle permanently in Arizona. These employees must still file taxes as an Arizona non-resident every April after receiving wages in Arizona.
