The Arkansas Department Finance and Administration released revised income tax withholding wage bracket tables, low income tax tables, and withholding formula method that are effective March 1, 2020. A revised employer withholding guide is also available.

Although the guide has been updated, it still shows that Forms W-2 are due to the agency by February 28, 2020. According to a Department representative, this is an error, and Forms W-2 are due to the agency by January 31, 2020. Employers filing 250 or more Forms W-2 are required to file electronically (go here for specifications). According to the representative, the Department will issue a revised guide reflecting the correct due date. (Telephone conversation, withholding tax branch representative, January 28, 2020.)

Revisions are result of 2019 legislation

As we reported, legislation enacted in early 2019 ((SB 211/Act 182, the Tax Competitiveness and Relief Act of 2019), reduces the highest Arkansas state income tax rate from the current 6.9% to 6.6% effective March 1, 2020 and to 5.9% in 2021. (EY Payroll Newsflash Vol. 20, #045, 3-12-2019.)

The intent of the legislation is to bring the state more into line with neighboring states' income tax rates. SB 211 is the third piece of legislation in the governor's plan to reform the Arkansas tax code. Legislation enacted in 2015 and 2017 also included income tax cuts.

Supplemental withholding rate decreases

The supplemental withholding rate is reduced to 6.6%, down from the previous 6.9%.

Supplemental wages are defined as bonuses, commissions and overtime wages paid at the same time as wages. Employers should withhold 6.6% of the payment for state income tax. Employees should be advised that the amount withheld may result in overwithholding, but the employee cannot recover the overpayment until the state income tax return is filed. (Withholding tax employer instructions, effective March 1, 2020.)

State withholding exemption certificate must be submitted by employee

Employees are required to submit to their employers Form AR4EC, Employee's Withholding Exemption Certificate, upon starting employment and when changing their withholding exemption information.

For more information on Arkansas withholding tax, see the Department's website.

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