Arizona Has New Withholding Rates for 2023

Arizona withholding rates are changing for 2023. As an employer you will need to take action. This is what you need to know….

New Tax Rates for 2023

With the passage of Senate Bill 1828, Arizona’s individual income tax rates are being reduced. This has resulted in a change to the Arizona A-4 Employee’s Arizona Withholding Election form. All previously available withholding percentages are gone with a new set ranging from 0.5% to 3.5%. These changes go into effect for the tax year of 2023.

What you Need to Do as an Employer

Ask each of your employees to complete a new Form A-4 by the end of this year. You can download a copy of the 2023 form here. Keep in mind that you should not advise your employees on what new rate to choose. Instead, let them know that they will need to look at their individual tax situation or consult with their personal tax accountant to make this determination. You can also point your employees to the withholding calculator provided on the state website.

Payroll providers will be working on software updates over the next 2 months. The state requires everyone to have the new withholding tax rate in place by January 31, 2023. As an employer you need to have your employee’s withholding selections updated within the first two pay periods following this date.  Thus all employees should be on the new rate by the first pay check in March 2023; however, you can implement the new rate as soon as your provider has their software updated.

If your employees fail to provide a new form by January 31, 2023, you should select the default rate of 2% on their behalf. If an employee provides an updated form after this date you should implement it according to standard payroll procedures.