How to Calculate Withholding Taxes in Michigan
Michigan levies a flat percentage income tax rather than using a progressive (tax bracket) system used by the federal government. All employers who are required to withhold federal income taxes must withhold Michigan state income tax. To calculate withholding taxes in Michigan, you need to get Form 446 from the Michigan Department of the Treasury (see Resources). Be sure you have an up-to-date Form 446, because the tax rate and exemption amounts change. If you have questions, contact the Michigan Department of the Treasury helpline at 517-636-4730 or for TTY (hearing impaired) 517-636-4999.
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Things You'll Need
- MI Form 446 Withholding Taxes Guidelines
- MI-W4 Employee Withholding Exemptions
Instructions
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1
Obtain copies of Form MI-W4 and have your employees fill them out (see Resources). You cannot use the federal W-4 for Michigan income tax withholding. If an employee has not submitted her MI-W4, assume there are zero exemptions when you calculate withholding taxes in Michigan.
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2
Total the employee's gross wages. In Michigan, this includes taxable fringe benefits (such as contributions to some retirement plans) and regular pay, bonuses, commissions and tips. Don't include reimbursement for business-related expenses that are nontaxable under federal (Internal Revenue Service) rules.
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3
Figure the amount of withholding exemptions. From the employee's MI-W4 Form, take the total number of personal exemptions and multiply by the exemption amount for the length of the pay period (from page 4, Form 446). For example, in 2008 the amount of one exemption for an employee paid weekly was $67.31, so if there were two exemptions claimed, the total exemption would have been $67.31 times 2, or $134.62.
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4
Calculate withholding for Michigan state income tax. Subtract the withholding exemption amount (from Step 3) from the gross pay (from Step 2) and multiply by the current tax rate. For example, the tax rate in 2008 was 4.35 percent. Continuing the example from Step 3, if the employee's gross pay for one week in 2008 was $500 with two exemptions, you would subtract $134.62 from $500 to get a taxable income of $365.38. Multiply $365.38 by 4.35 percent to find the tax to be withheld (in this example, $15.90).
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Tips & Warnings
Refer to Form 446 for instructions for filing and remitting taxes you have withheld from employee paychecks.
Consider using the Michigan Department of the Treasury EFT (Electronic Funds Transfer) system for remitting taxes. It is fast, secure and cuts down on paperwork.
