Withholding Taxes: Iowa

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

Authors: Stuart R. Buttrick and Tareen Zafrullah, Faegre Drinker Biddle & Reath LLP

Summary

• Iowa employers must withhold Iowa income taxes on wage payments made to nonresident and resident employees who work in Iowa. An employee is an Iowa resident for income tax purposes if certain criteria are met. Nonresidents may elect out of Iowa income tax withholding if they do not anticipate having any Iowa income tax liability. Iowa has a reciprocal agreement with Illinois regarding state income taxes. See Withholding on Residents and Nonresidents.
• Iowa employers determine income tax withholding using Form IA W-4, Employee Withholding Allowance Certificate. See Employee Withholding Forms.
• The withholding rate on supplemental wage payments, such as bonuses, is calculated differently depending on when the supplemental wage payments are made. See Supplemental Wages.
• Each year employers must provide copies of federal Form W-2, Wage and Tax Statement, to each employee from whom any amount of Iowa income tax was withheld, or would have been withheld under the approved tables and other methods if the employee had claimed no more than one withholding allowance. See Form W-2 Reporting Requirements.
• Iowa employers must maintain payroll and withholding records for a certain number of years. See Recordkeeping Requirements.