State Tax Updates from Across the US - Jan 2006

Alabama
Withholding. The interest rate on tax deficiencies for the first quarter of 2006 is 7%.

CALIFORNIA
Wage and Hour. Governor Schwarzenegger, in his State of the State address, announced a proposal to increase the state's minimum wage by $1 over the next 18 months. The governor's proposal would increase the hourly minimum wage to $7.25 in September 2006 and to $7.75 in July 2007.

CONNECTICUT
Withholding. The state Web site now includes 2005 Annual Reporting Forms (CT-W3, CT-1096, and CT-945) and information on Form 1099 MISC reporting. The 2006 withholding coupon booklets will be in the mail shortly. If a withholding payment is due and the employer does not have a form, the employer may either: (1) use Fast-File to make the withholding payment or (2) download the 2006 Form CT-WH [Dept. Rev. Serv. Web site].
The Department of Revenue Services (DRS) has issued a revised information publication concerning payment of taxes by electronic funds transfer (EFT). The revised publication modifies and supersedes Information Publication 2004(28) [ Connecticut Informational Publication 2005(30), 12/29/2005].

IDAHO
Withholding. Farmers filing Form 956, Idaho Withholding Reconciliation, have until January 31 to file and pay the tax they withheld from their employees' wages. This is the same date that other employers file this return [ Idaho Tax Update , 12/00/2005].

ILLINOIS
Withholding. The Illinois Department of Revenue has issued Publication 121, Illinois Income Tax Withholding for Household Employees . It replaces Booklet IL-700-H, Illinois Household Employer's Tax Guide and Tables.

IOWA
Withholding. Withholding tables expire after March 31, 2006. The Iowa Department of Revenue reminds employers that submitting the Iowa Verified Summary of Payments (VSP) is an electronic process through eFile & Pay, either on-line or by touch-tone telephone. Paper VSPs are not available. If you are registered as an Iowa withholding agent but have zero withholding for 2005, you are still required to file a VSP. VSPs for 2005 are due Feb. 28, 2006. Do NOT send Forms W-2 and 1099 to the Iowa Department of Revenue. This information is obtained from the IRS [E-mail from Dept. Rev., 01/11/2006].

KANSAS
Unemployment. Employer tax rates for 2006 range from 0.07% to 5.4% for positive-balance employers, and 5.6% to 7.4% for negative-balance employers. The rates for newly rated employers, which vary by industry, are as follows: construction, 5.71%; information, 5.24%; mining, 4.46%; administrative support, waste management, and remediation, 4.93%; manufacturing, 5%; real estate, 4.43%; professional, scientific, technical, 4.46%; government, 0.16%; and all other sectors, 4.33%. The taxable wage base remains at $8,000 [ Kansas DOL Web site ].

MAINE
Unemployment. The new employer rate in 2006 is 1.78%. Tax rates for experienced employers range from 0.53% to 5.4%. The taxable wage base remains at $12,000 [ Maine Bureau of Unemployment Compensation Web site ]. \

MASSACHUSETTS
Unemployment. Schedule D continues to be in effect in 2006 with rates for experienced employers ranging from 1.12% to 10.96%. The rate for new nonconstruction employers is 2.53%. New construction employers pay 7.17%. All employers must make a workforce training fund contribution equal to 0.06% of taxable wages. The solvency assessment rate is 1.46%. The taxable wage base remains $14,000 [ Mass. Div. of Unemployment Assistance Web site ].

MICHIGAN
Single Business Tax. Insurance premiums paid by a taxpayer for directors' and officers' liability coverage and for personal liability coverage of employees, officers and directors are compensation for purposes of the single business tax (SBT) add back and the Small Business Credit. Note. The definition of compensation found in the single business tax law — Mich. Comp. Laws Ann. § 208.4— encompasses the definition of compensation found in income tax (withholding) law — Code Sec. 3401, Mich. Comp. Laws Ann. § 206.351and Mich. Comp. Laws Ann. § 206.6 [ Internal Policy Directive 2005-4, 12/14/2005 ].

MISSISSIPPI
Withholding. The Mississippi State Tax Commission is reminding taxpayers that the 2005 Annual Information Return (Form 89-140) must accompany all W-2 and 1099 filings. If the Form 89-140 does not balance, an amended or additional monthly or quarterly return (Form 89-105) must be separately filed to report the discrepancy. All amended or additional returns must be filed using a paper Form 89-105; they cannot be filed using the Internet application. All employers with 99 or fewer Forms W-2 have until Jan. 31, 2006, to file paper Forms W-2. However, all filings (not just employers with 100 or more Forms W-2), mailed after Jan. 31, 2006, must be filed using magnetic media in the MMREF-1-TY05 format [ Withholding Internet Filing Information, 01/03/2006 ].

NEW HAMPSHIRE
Unemployment. Employers whose tax rates are determined under Schedule I (positive reserve) and new employers will receive a 1% UI tax rate reduction in the first quarter of 2006 [NH Employment Security Web site].

OHIO
Withholding. For 2006, there is no daily bracket withholding table; the percentage table's daily method must be used. Effective Jan. 1, 2006, these Ohio school districts established income taxes: Berne-Union, Circleville, Jennings, Kalida, Logan Elm, London, Ross, and Shelby. Effective Jan. 1, 2006, these Ohio school districts have changed their income tax rates: Antwerp, Bloom-Carroll, Continental, Covington, Eaton, Fort Loramie, Fort Recovery, Hardin Northern, Liberty Union-Thurston, National Trail, and Triad. Effective Jan. 1, 2006, these Ohio school districts have renewed their income taxes: Columbus Grove, New Lebanon, Parkway, Seneca East, Valley View, and Vanlue. On Feb. 7, 2006, these Ohio school districts will hold income tax elections: Arcanum-Butler LSD, Jonathan Alder LSD and Bellevue CSD.
Effective Jan. 1, 2006, sublevies are added to the total composite levies in these municipalities: Bluffton Village, Bryan City, Elmore Village, Greenhills Village, Huber Hts., Toronto City, and Vandalia City. Effective Jan. 1, 2006, this sublevy, which would have expired, is continued: Leipsic Village, 0.005. Effective Jan. 1, 2007, this sublevy, which would have expired, is continued: Fostoria City, 0.005. On Feb. 7, 2006, these Ohio municipalities will hold income tax elections: Monroe City, Galion City and Windham Village.

TENNESSEE
Unemployment. Premium table 4 is in effect for the first and second quarters of 2006. Tax rates for experienced employers, other than experienced governmental employers, range from 0.3% to 10% [Per conversation with state].

UTAH
Unemployment. Contribution rates for experienced employers in 2006 range from 0.4% to 9.4%. New employer rates vary by industry. New out-of-state contractors pay 9.4% unless they purchase an existing business. The taxable wage base is $24,000 (up from $23,200 in 2005) [Utah Dept. of Workforce Services Web site].

VERMONT
Withholding. Effective beginning in 2006, if federal withholding on supplemental wages (over $1 million) is computed at 35%, Vermont withholding on such supplemental wages must be computed at 9.50% [Vt. Income Tax Withholding Tables and Instructions].