Withholding Taxes: Arkansas

This item is part of Withholding Taxes.

The below content should be reviewed in conjunction with the in-depth federal coverage of this topic provided above.

Authors: E. B. Chiles IV, Cameron C. McCree and Amber Davis-Tanner, Quattlebaum, Grooms, Tull & Burrow PLLC.

Summary

  • New employers must register with the Arkansas Department of Finance and Administration (DFA) before starting to withhold by submitting a Withholding Registration form. Employers calculate the amount to withhold from employees' wages by using the withholding tables published by the DFA. See New Employers.
  • Employers must withhold income tax from the wages of employees who work in Arkansas, regardless of whether the employee is a resident or nonresident. A border city exemption is in effect for residents of Texarkana, which is located on the border of Texas and Arkansas. See Withholding on Residents, Nonresidents and Expatriates.
  • When they are hired, each employee must complete and submit to the employer a Form AR4EC, Employee's Withholding Exemption Certificate. Federal Form W-4 is permitted to be used as a substitute for the state form. If an employee wishes to claim exempt status, it must complete and submit Form AR4ECSP, Employee's Special Withholding Exemption Certificate. See Employee's Withholding Exemption Certificate.
  • If supplemental wages, such as bonuses, are paid to an employee, the employer must withhold on those wages at a flat 7 percent of the payment. See Supplemental Wages.
  • Employers must provide each employee with two copies of Form W-2, Wage and Tax Statement, on or before January 31 following the close of the income tax year. Terminated employees are also entitled to copies. See Form W-2 Requirements.
  • Employers that fail to withhold from wages as required by law are subject to penalties. See Penalties.
  • Employers must keep payroll records in both machine-sensible and hardcopy formats for at least six years after the date the return was filed. See Recordkeeping Requirements.