Withholding Taxes: Montana

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

Authors: Jason Ritchie, Holland & Hart LLP

Summary

• Wages paid to Montana residents who work in and outside the state are subject to withholding. An employee is a Montana resident for income tax purposes if certain criteria are met. Montana income tax must also be withheld from wages paid to Montana nonresident employees for services performed in the state. A withholding exemption applies to certain short-term-service employees. Montana has a reciprocal agreement with North Dakota. See Withholding on Residents, Nonresidents and Expatriates.
• Montana employers determine withholding using Form MW-4, Montana Employee's Withholding Allowance and Exemption Certificate. Certain employees may claim an exemption from withholding using this form. See Employee Withholding Forms.
• Employers may withhold on supplemental wage payments, such as bonuses, as if the payments were a regular wage payment, or they may withhold a flat percentage. 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 Montana 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.
• All employers must keep accurate payroll records. See Recordkeeping Requirements.