In Indiana, HEA 1485-2015 combined county adjusted gross income tax, county option income tax, and county economic development income taxes into one combined local income tax. The new local income tax goes into effect January 1, 2017.
Effective January 1, 2017, the Indiana Department of Revenue will publish one local income tax rate in Departmental Notice #1 and in its return instructions for tax years starting in 2017. That rate will be applicable to both resident and nonresident taxpayers. Any changes to local income tax rates for withholding will be published by the department in Departmental Notice #1, which is published on the department’s website twice a year and is effective January 1 and October 1 each year. Other than listing one rate as opposed to two, no changes in the publication dates or location of publication on the department’s website will occur.
Do any of your employees claim “Exempt” on their W-4 Forms? If so, remember that the form expires annually. If your employee wants to continue to claim “Exempt” from withholding in 2017, he or she will need to fill out a new W-4 Form for 2017. Your system should allow you to create a report listing all the employees who are set up in payroll as “exempt from withholding”. Make sure to send out a reminder memo to all employees regarding withholding – both those claiming exempt and those who don’t. January is a good time to fill out new forms. Based on changes in their tax situations in 2016, some employees may want to make changes to their withholding.