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December 23, 2020
2020-2928

Indiana county income tax rate changes effective January 1, 2021; 2020 Form W-2 reminders

The Indiana Department of Revenue released Departmental Notice #1, How to Compute Withholding for State and County Income Tax, effective January 1, 2021. (News release, 12-17-2020.)

The notice shows that the counties of Martin, Owen, Randolph, Shelby, Switzerland, and Union changed their local withholding income tax rates effective January 1, 2021.

The changes are as follows:

  • Martin — The rate increases from 1.75% to 2.50%.
  • Owen — The rate increases from 1.40% to 1.60%.
  • Randolph — The rate increases from 2.25% to 2.50%.
  • Shelby — The rate increases from 1.50% to 1.60%.
  • Switzerland — The rate increases from 1.0% to 1.25%.
  • Union — The rate increases from 1.75% to 2.0%.

The counties of Pulaski and Wayne changed their local withholding rates effective October 1, 2020. See EY Tax Update Alert 2020-2342, 09-29-2020 for more information.

State Form WH-4 required from new employees

Indiana employees are required to submit state Form WH-4 to their employer upon starting employment and if the number of exemptions decrease from what was previously reported.

An employee may file a new Form WH-4, Employee's Withholding Exemption and County Status Certificate, at any time if the number of exemptions increases. A new Form WH-4 must be filed within 10 days if the number of exemptions previously claimed decreases due to the following:

  • The employee divorces (or legally separates from) a spouse for whom the employee has been claiming an exemption or the spouse claims him/herself on a separate Form WH-4

    OR

  • Someone else takes over the support of a dependent the employee claims or the employee no longer provides more than 50% of that person's support for the tax year

State income tax rate remains at 3.23%

The state individual income tax rate was reduced from 3.4% to 3.3% effective for calendar years 2015 and 2016 and was further reduced to 3.23% for 2017 and later years. (HB 1001, PL 205, signed by the governor on May 8, 2013.)

Other legislation enacted in 2015 required that local income taxes collected by Indiana counties be consolidated into one local income tax rate per county. The law also required that both residents and nonresidents living and/or working in a county pay at one local income tax rate, increasing the local taxes paid by nonresidents. For more information, see Department Notice #42.(HB 1485, PL 243, signed by the governor on June 5, 2015.)

2020 Form W-2 filing reminders

Employers reporting 25 or more 2020 Forms W-2 are required to electronically file the annual withholding reconciliation (Form WH-3) and corresponding Forms W-2. According to the Department, as of December 1, 2020, removable media (i.e., CD, DVD, USB flash drive, 3480 or 3490 cartridges) will no longer be accepted from employers. Any removable media received after this date will be returned or destroyed.

The deadline for filing the 2020 Forms W-2 is February 1, 2021.(Important notice, Department website.)

As we previously reported, the Department required that beginning September 8, 2020, existing business tax customers that filed sales and withholding taxes via the INtax system were required to migrate to the Department's new electronic reporting system INTIME. Step-by-step migration instructions may be found in this document. Business tax customers were encouraged to migrate to the new system as soon as possible. However, to provide adequate time to complete this transition, INtax remains available to file and pay for current periods until December 31, 2020. Past period reporting, however, needs to be performed using INTIME.

INtax will also remain available to support the 2020 Form WH-3 and Forms W-2 filing requirement from January 1, 2021, to February 28, 2021.

Employers will need to register and re-enter bank account information in INTIME once a new logon has been created. For more information, see the INTIME website.

For more information, see the 2020 Form W-2 specifications. If, after reviewing the specification. you still have unanswered questions regarding the electronic filing of Forms W-2, contact the Department by telephone at +1 317 232 2240 or send an email to Bulkfiler@dor.IN.gov.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)
   • Kristie Lowery (kristie.lowery@ey.com)

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