Arizona Withholding

Q. I’m using PaycheckCity.com to estimate my paycheck after moving to Arizona. What’s up with the percentage stuff? Why is there no filing status and allowance values like everyone else?

A. I wish I could tell you why Arizona withholds like it does. Employers in Arizona calculate withholding as a percentage of federal withholding. This is the last state that bases it’s withholding on the federal calculation. In past years as federal withholding as decreased for many people. As federal withholding declines so does state withholding if they are connected. Many states have “de-coupled” their withholding systems to ensure that collections do not decline based on federal tax decisions. Arizona still has not figured this out.

The tricky part is that if you are not or have never been a full-year resident, you have no way to know what a good percentage is for your withholding. Some people with no federal tax liability in my practice still end up with an Arizona liability and have to pay all the tax at the end of the year because they have no federal withholding to calculate against for Arizona purposes. I would love to see this changed someday.

In the meantime, if you have any history in Arizona, you can look at your 140 tax return. Look at the tax liability line, then look at the federal tax liability line. By dividing the two, you can see which line of the A-4 relates the closest to you.

For those using PaycheckCity.com, the percentage in Arizona defaults to 0%. You will need to change it to whatever you chose 0n your A-4 form.

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