October 3, 2022
Arkansas income tax withholding rates are updated effective October 1, 2022 to reflect law lowering the top income tax rate
The Arkansas Department of Revenue has released the revised withholding tax formula reflecting the changes made by SB.1 (Act 2), enacted on August 11, 2022. Retroactive to January 1, 2022, SB. 1 lowers the top marginal income tax rate from 5.5% to 4.9% and increases the income level at which the highest tax rate applies. SB. 1 accelerates the tax cuts that were signed into law in December 2021 and is anticipated to save taxpayers over $400 million. (Governor Hutchison, Summary of Tax Cuts.)
The revised withholding formula is effective with wages paid on after October 1, 2022. The Department also revised its Withholding Tax, Employer's Instructions.
Withholding on supplemental wages
If bonuses, commissions, or overtime wages are paid at the same time as regular wages, the income tax withheld is determined by deducting 4.9% of the bonus or commission for state income tax.
The Department suggests that employers advise their employees that the 4.9% withholding rate could, in some cases, be more than the income tax liability and cannot be recovered until the employee files the Arkansas personal income tax return. (Withholding Tax, Employer's Instructions, p 4.).
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