Internal Revenue Code Conformity by State

Author: Alice Gilman

For administrative convenience, some states that require employers to withhold income taxes from employees' wages tie their definition of wages to that of the federal Internal Revenue Code (IRC). However, when any changes are made to the federal definition, those states' definitions are likewise affected. Other states tie their definition of wages to an earlier version of the IRC in effect as of a specific date.

Regardless of which version of the IRC a state follows, there may be important exceptions applicable to certain types of income or benefits. Because the definition of wages is the basis for calculating state taxable income, it is important for an employer to know which definition a state follows.

The following chart summarizes which version of the IRC each state follows in defining taxable wages for withholding purposes in the current year. States that do not have an income tax or do not have an applicable provision are marked N/A.