Withholding Taxes: Arkansas

Federal law and guidance on this subject should be reviewed together with this section.

Authors: E. B. Chiles IV, Cameron C. McCree and Amber Davis-Tanner, Quattlebaum, Grooms, Tull & Burrow PLLC.

Summary

• New employers must register with the Arkansas Department of Finance and Administration (DFA) before starting to withhold by submitting a Withholding Registration form. See New Employers.
• Employers must withhold income tax from the wages of employees who work in Arkansas, regardless of whether the employee is a resident or nonresident. Arkansas income tax is withheld from the pay of nonresidents only on work physically performed in Arkansas. A border city exemption is in effect for residents of Texarkana, Texas, which is located on the border of Texas and Arkansas. See Withholding on Residents, Nonresidents and Expatriates.
• When they are hired, each employee must complete and submit to the employer a Form AR4EC, Employee's Withholding Exemption Certificate. Federal Form W-4 is permitted to be used as a substitute for the state form. See Employee's Withholding Exemption Certificate.
• If supplemental wages, such as bonuses, are paid to an employee, the employer must withhold on those wages at a flat percentage of the payment. See Supplemental Wages.
• Employers must provide each employee with two copies of Form W-2, Wage and Tax Statement, on or before January 31 following the close of the income tax year. Terminated employees are also entitled to copies. See Form W-2 Requirements.
• Employers that fail to withhold from wages as required by law are subject to penalties. See Penalties.
• Employers must keep payroll records in both machine-sensible and hardcopy formats for a certain number of years set by law. See Recordkeeping Requirements.