Iowa Withholding Tax Information
Every employer who maintains an office or transacts business in Iowa and who is required to withhold federal income tax on any compensation paid to employees for services performed in Iowa is required to withhold Iowa individual income tax from that compensation. The amount withheld is calculated using the Iowa withholding tables, formulas or percentages.
Registering as an Iowa Withholding Agent
Register with the Internal Revenue Service first to obtain a Federal Identification Number (FEIN) or call the IRS at 1-800-829-4933. There is no fee for registering.
Within 15 days, each new hire and rehire is required to complete and sign an Iowa W-4 (44-019). It must show the number of allowances the employee is claiming for family members, for itemized deductions, for adjustments to income or for the child/dependent care credit. Employees who hold more than one job at a time should consider how the W-4s they complete with each employer will interact. If for any reason the employee does not complete an IA W-4, the employer must withhold at zero allowances. Reference 701 — 46.3(2) Iowa Administrative Code
Employers must keep copies of W-4 forms in their files for at least four years. Reference 701 — 46.3(2)e Iowa Administrative Code
An employee who does not expect to owe tax during the year may file the Iowa W-4 claiming exemption from tax. Persons below the annual income levels shown below are eligible to claim exemption from Iowa withholding:
- A married couple or a head of household with a total income of $13,500 or less.
- A single person with income of $9,000 or less.
- A single person with income of less than $5,000 who is claimed as a dependent on someone else’s Iowa return.
Exemption for persons age 65 or older: (Note: Nonresidents may not claim this exemption.)
- A married couple or a head of household with a total income for the year of $32,000 or less may file for exemption, if at least one spouse (in the case of a married couple) or the head of household is 65 years or older as of December 31 of the year.
- A single person who is 65 years or older as of December 31 of the tax year may file for exemption if their income is $24,000 or less.
Exemption for members of the military and spouses
Members of the armed forces, armed forces military reserve, and the national guard in an active duty status (as defined in Title 10 of the U.S. Code) can exclude from Iowa pay received from the federal government for military service performed.
Military spouses may be exempt from Iowa income tax on wages if:
- Their spouse is a member of the armed forces present in a state other than their home state in compliance with military orders;
- They are present in a state other than their home state solely to be with their spouse;
- They maintain their domicile in their home state, and
- Military orders must station the member of the armed forces in the state of Iowa
Any employer doing business in Iowa who hires or rehires an employee must submit the Centralized Employee Registry Reporting form (the top portion of the Iowa W-4) to the Iowa Department of Human Services (IDHS) within 15 days of the hire or rehire date. Any questions on completing the form should be directed to the Employers Partnering in Child Support (EPICS) Unit at 1-877-274-2580.
The Centralized Employee Registry form may be submitted by:
- Mail - CER, PO Box 10322, Des Moines, IA 50306-0322
- Fax - 1-800-759-5881
- Website - (Centralized Employee Registry Reporting form)
If you are an independent contractor, do not complete a W-4 for Iowa. Instead, you may be required to make estimated payments on your income. See our individual income tax forms web page for estimated payment information, forms and instructions.
Note, however, you also must complete a Centralized Employee Registry form from the Iowa Department of Human Services. The person with whom you are contracted may have a supply of these. Otherwise, call IDHS at 1-877-274-2580 to obtain one or use the top of the IA W-4.
The Internal Revenue Service (IRS) establishes the criteria for determining if a worker is an employee or an independent contractor. If you have employees and not independent contractors, you must act as a withholding agent on both the federal and state levels. Review the information on the IRS Web page: Independent Contractor (Self-Employed) or Employee?
Wages and Other Employee Compensation
Iowa income tax withholding is applied to the same wages and compensation to which federal withholding applies. Certain payments made by the employer into employee retirement plans or for employee heath insurance are not considered wages and are not included in the calculations of withholding tax. See IRS Publication 15, Circular E, for details.
"Supplemental wages" includes a bonus, overtime pay, commission or other special payment that is made in addition to the regular wage payment. If federal income tax is withheld on a flat rate basis, Iowa income tax is required to be withheld at the rate of 6 percent. However, if the supplemental wage payment is included with the regular wage payment, the two are combined and the withholding tables or formulas are used. Reference 701 — 46.2(3) Iowa Administrative Code
Winnings from Gambling
Iowa tax is required to be withheld at the rate of 5 percent from lottery winnings and winnings from games of skill, games of chance and raffles in excess of $600, pari-mutuel winnings of more than $1,000, and winnings in excess of $1,200 from slot machines on riverboats or at racetracks. Reference 701 — 46.1(1)d Iowa Administrative Code
Wages paid to agricultural labor are subject to withholding for state income tax purposes to the same extent that the wages are subject to withholding for federal income tax purposes.
Nonwage Withholding Requirements
"Nonwage income" includes pensions, annuities, supplemental unemployment benefits, sick pay benefits and other nonwage income payments to Iowa residents. Iowa income tax is generally required to be withheld in cases where federal income tax is withheld. In situations where no federal income tax is withheld, the receiver of the payment may choose to have Iowa withholding taken out.
Withholding on nonwage income may be made at a rate of 5 percent. Withholding agents should be aware that in certain cases the 5 percent rate may be excessive. Payers of nonwage income also have the option of withholding Iowa income tax from these payments on the basis of tables and formulas.
Iowa withholding is not required when payment amounts or taxable amounts of nonwage incomes fall below certain levels, when payments are not subject to Iowa income tax, or when no federal income tax withholding is required on those payments.
Pension and Retirement Income Exclusion (IAW-4P)
A partial exemption is provided for pensions, annuities, self-employed retirement plans, deferred compensation, IRA distributions, and other retirement benefits to qualified individuals.
To qualify you must be 55 years of age or older, disabled or a surviving spouse of an individual who would have qualified. The exemption is up to $12,000 for a joint filing status and up to $6,000 for all other filing statuses. Eligible recipients should complete the IA W-4P (pdf).
State income tax is not required to be withheld if the amount of the distribution is $500 per month or less or if the taxable amount is $500 or less and the person receiving the distribution is eligible for the partial exemption of retirement benefits. In instances where the distribution amount or the taxable amount is more than $500 per month but less than $6,000 for the year, no state income tax is required to be withheld, if the person receiving the distribution is eligible for a partial exemption of retirement benefits. Reference 701 — 46.1(2) and 46.3(4) Iowa Administrative Code
For tax years beginning on or after January 1, 2014, military retirement benefits can be excluded from Iowa individual income tax and withholding. The exclusion also applies to military survivor benefits received under 10 U.S.C. 1447. The exemption is in addition to the general $6,000/$12,000 pension exclusion available for Iowa individual income tax for taxpayers 55 years of age or older.
Nonresident Wage and Salaries
Employers doing business in Iowa are required to withhold Iowa individual income tax from the wages and salaries of nonresident employees working in Iowa at the same rate as for residents.
Exception: See Iowa-Illinois reciprocal agreement later in this publication.
Other Nonresident Income
The payer or withholding agent may withhold on a one-time basis. The following additional types of income to nonresidents are subject to Iowa withholding:
- Compensation paid to entertainers performing in Iowa, but not payments to entertainment corporations.
- Rental payments received from Iowa property.
- Taxable Iowa-source income paid to a beneficiary of an Iowa estate or trust.
- Iowa-source income received by a nonresident partner or shareholder of a partnership or S corporation doing business in Iowa.
- Income derived from any business of a temporary nature such as contracts for construction or fees paid for services in Iowa.
Nonresidents Working in Interstate Commerce – Railroads / Airlines / Trucking
Under provisions of federal law, Iowa tax should not be withheld from nonresidents working in Iowa as employees of railroads, airlines, and trucking firms in interstate commerce if they are working in at least one other state. Withholding may be required for the employee’s state of residence or the nonresident employee may be required to make estimated payments to their state of residence.
Iowa-Illinois Reciprocal Agreement
Iowa and Illinois have a reciprocal agreement for individual income tax purposes.
Any wages or salary made by an Iowa resident working in Illinois is taxable only to Iowa and not to Illinois. Any wages or salary made by an Illinois resident working in Iowa is taxable only to Illinois and not to Iowa.
An Iowa resident working for wages or salary in Illinois should complete and file Illinois form IL-W-5-NR “Employee's Statement of Nonresidence in Illinois” with the employer so that the employer will be aware it is appropriate to withhold Iowa income tax. The Iowa resident should also complete an Iowa W-4.
An Illinois resident working for wages or salary in Iowa should complete and file the IA 44-016 “Employee's Statement of Nonresidence in Iowa” with the employer so that the employer will be aware it is appropriate to withhold Illinois income tax.
Iowa will tax any Iowa-source income received by an Illinois resident that is not from wages or salaries. Illinois will tax any Illinois-source income received by an Iowa resident that is not from wages or salaries. Examples of income that are not wages and salaries and, therefore, not covered under the Iowa-Illinois Reciprocal Agreement are Iowa gambling winnings and unemployment compensation for employment in Iowa.
Unemployment Benefit Payments
Recipients of benefits may choose to have state income tax withheld from the benefit payments at a rate of 5 percent. Questions concerning state unemployment are answered by Iowa Workforce Development at 1-866-239-0843.
Exemptions from Iowa withholding follow the guidelines of the Internal Revenue Service, with the following exceptions:
Domestic Workers and Clergy
Domestic workers and clergy are generally excluded from Iowa tax withholding requirements. However, if they anticipate an Iowa tax liability of $200 or more and are not subject to withholding, they may be required to submit quarterly estimated payments.
Interest and Dividends
Interest and dividends are not subject to Iowa withholding.
Film or Television Production - Nonresidents
Wages of nonresidents engaged in film production or television production may not be subject to Iowa withholding tax if an exemption has been filed. Applications for exemption must include:
- Each nonresident employee’s name and permanent address;
- Social Security Number;
- Estimated amounts the employee is to be paid.
Applications for exemption from withholding for nonresident employees engaged in film production or television production should be directed to the Iowa Department of Revenue, Tax Management Division, Compliance Services, Hoover State Office Building, P.O. Box 10456, Des Moines, Iowa 50306.
Agricultural Payments to Nonresidents
Agricultural payments to nonresidents are exempt from Iowa withholding if the withholding agent provides certain information to the Department about the sales of agricultural commodities or products. The following information must be included:
- Name, address, Social Security Number of each nonresident;
- Payments made in the calendar year to the nonresident;
- County or counties in which the nonresident worked, owned or leased property, had products stored or livestock located;
- The type of agricultural commodities or products: commodity credit certificates, grain, livestock, domestic fowl, or others.
Note: Although these types of payments are not subject to Iowa withholding, they are subject to Iowa income tax in most instances.
- Quarterly if you remit less than $6,000 tax per year (less than $500 per month)
- Monthly if you remit $6,000 - $120,000 tax per year ($500 - $10,000 per month)
- Semi-monthly if you remit more than $120,000 tax per year (more than $10,000 per month; more than $5,000 semi-monthly)
Based on their filing frequency, every employer is required to file for each applicable period during the calendar year, even if compensation was not paid during a period. If no wages or compensation was paid during a period, the employer will enter zeroes on the return/deposit for that period.
- Quarterly filers are required to file a quarterly return for each calendar quarter for which they are registered.
- Monthly filers are required to file two monthly deposits and one quarterly return for each calendar quarter.
- Semi-monthly filers are required to file six semi-monthly deposits and one quarterly return for each calendar quarter.
Withholding returns are submitted electronically through the eFile & Pay system. Once you are registered as a withholding agent, the Department will send you a Business eFile Number (BEN). This number is necessary to access eFile & Pay.
If you were awarded a tax credit certificate for the period being filed, a withholding credit schedule will be provided through eFile & Pay. Each credit claimed against withholding tax is recorded separately on this schedule. Information entered on the credit schedule will be automatically populated on the withholding quarterly return.
Credits that may be claimed against withholding tax are as follows:
- The Iowa New Jobs Training Program Credit (NJC) – This credit is available to businesses to cover the cost of approved training programs entered into with community colleges for new employees hired due to business expansion, the start-up of a new business, or relocation from outside Iowa. The credit equals 1.5% or 3.0% of the gross payroll attributable to the new employees, depending on the achievement of certain wage targets. The credit may only be claimed after payments are made to the community college under terms of the job training agreement. (Iowa Code 260E) The community college gives the credit certificate number to the qualifying business.
- The Supplemental New Jobs Credit (SJC) – Businesses located in an enterprise zone or eligible for the New Jobs and Income Program (NJIP) may also be eligible to receive additional job training credits equal to 1.5% of the gross wages of new employees engaged in approved job training under the 260E program. (Iowa Code 15.331) The community college gives the credit certificate number to the qualifying business.
- The Accelerated Career Education Credit (ACE) – Businesses participating in the program may claim a credit of up to 10.0% of the hiring wage that would be paid to individuals completing approved training by community colleges. (Iowa Code 260G) The community college gives the credit certificate number to the qualifying business.
- The Targeted Jobs Tax Credit (TJC) – This credit is available to employers that created targeted jobs in an urban renewal area and that enter into a withholding agreement with pilot project cities approved by the Iowa Department of Economic Development. The credit is equal to 3.0% of the gross wages paid to employees under the withholding agreement. The employer shall remit the amount of the credit to the pilot project city. The qualifying employer will be given the credit certificate number by the Iowa Department of Revenue.
Additional information regarding these programs may be obtained on the Iowa Department of Economic Development website.
Remitting the Tax
Several payment options are offered through EasyPay Iowa.
A withholding agent who fails to withhold and pay to the Department any money required to be withheld and paid is personally, individually and corporately liable to the State of Iowa. If this occurs, the amount of withholding may be assessed against the withholding agent in the same manner as is used to assess personal or corporate income tax.
Visit our Penalty and Interest page for more information.
Verified Summary Report
All withholding agents are required to submit a completed Verified Summary of Payments Report (VSP) by January 31. This covers the Iowa income tax withholding payments made in the prior calendar year. The VSP is submitted online through eFile & Pay. Withholding Tax Forms can be found here.
W-2s, W-2Gs, & 1099s
- For tax year 2017, beginning in 2018:
- Withholding agents with 50 or more employees must electronically file W-2 forms with the Department by the last day of January following the tax year.
- Withholding agents with less than 50 employees may, but are not required to, electronically file W-2 forms with the Department by January 31, 2018.
- Withholding agents may, but are not required to, electronically file W-2G and 1099 forms with the Department by January 31, 2018.
- Beginning in 2019 for tax year 2018:
- All withholding agents are required to electronically file W-2, W-2G, and 1099 forms with the Department by the last day of January following the tax year.
W-2s must be given to employees on or before the last day of January following the tax year or within 30 days of the time the last wage payment is received if requested by the employee. This statement must contain the name, address and federal employer identification number of the employer; and the name, address and Social Security Number of the employee; the gross amount of compensation paid to the employee during the year and the amount of federal and state tax withheld. Reference 701 — 46.3(3)d Iowa Administrative Code
Employees: If you need a copy of your W-2, first ask your employer. The Department is not able to furnish W-2s. If you are unable to obtain a copy from your employer, here are some other possible options:
- Social Security Administration (SSA) - will provide copies of Forms W-2 for retirement purposes at no charge and for other than retirement purposes for a fee. Call 1–800–772–1213, or visit the SSA website at www.ssa.gov for instructions on how to obtain wage information from the SSA.
- Internal Revenue Service (IRS) – will provide an exact copy of a previously filed and processed tax return with attachments (including Form W-2).
- For the Iowa Department of Revenue, you should complete Form 4506, Request for Copy of Tax Return, and mail it to the address listed in the instructions. A fee will be charged for each tax year requested.
Does the State of Iowa assign its own employer identification number?
Yes; however, the Federal Employer Identification Number is normally used as part of the Iowa withholding number with a 3-digit suffix added for Iowa registration.
I need to register to withhold Iowa tax from employees’ wages, but have not yet received my Federal Employer Identification Number. What will my number be?
Complete the Iowa Business Tax Registration form online, indicate "Applied for" in the FEIN field.
Is the employer required to match the amount of Iowa income tax withheld from the employees’ wages?
No. There is no matching of withholding of Iowa income tax from the employees’ wages.
How is withholding calculated?
There are two methods of figuring the Iowa income tax withholding. The employer can use either the manual tables or the computer formula. Either method is acceptable. The tables and computer formula are available on the Withholding Tax Information page.
Where does an employer obtain blank W-2s, Iowa W-4s and Iowa W-4Ps?
W-2s may be obtained from the Internal Revenue Service on the IRS website or by calling 1-800-829-3676 or by purchasing them through an office supply/forms business.
Iowa W-4s and Iowa W-4Ps are available free of charge here.
When can an employee fill out an Iowa W-4 to change their number of allowances?
An employee can adjust their withholding at any time by providing the employer with a new Iowa W-4.
How can I obtain a refund of Iowa withholding?
To receive a refund of Iowa withholding, file an amended quarterly withholding return(s).
To receive a refund of Iowa withholding due to jobs credit:
- File an amended quarterly withholding return for each affected quarter.
- On the amended return(s), indicate only the jobs credit earned in that quarter.
- For tax periods beginning 7-1-12 and after, if you were awarded a tax credit certificate for the period being filed, a withholding credit schedule will be provided through eFile & Pay. Each credit claimed against withholding tax is recorded separately on this schedule. Information entered on the credit schedule will be automatically populated on the amended withholding quarterly return.
- For periods through 6-30-12, the amended returns should properly show the amount of jobs credit on line 3 of the quarterly return.
Do not combine multiple quarters of jobs credits.