What payroll deductions are employers required to withhold?

Required Payroll Tax Deductions for Employers in Indiana

Employers operating in Indiana must withhold specific payroll taxes from employee wages to comply with state and federal regulations. Understanding these deductions is crucial for accurate payroll processing and maintaining compliance.

Federal Payroll Deductions

• Federal Income Tax: Employers must withhold federal income tax based on the employee’s Form W-4 and IRS tax tables.
• Social Security Tax: Withhold 6.2% of wages up to the annual wage limit for Social Security.
• Medicare Tax: Withhold 1.45% of all wages for Medicare. Additional 0.9% Medicare tax applies for wages over $200,000 (single filers).

Indiana State Payroll Deductions

• Indiana State Income Tax: Employers must withhold state income tax based on the employee’s Form WH-4 and Indiana withholding tables.
• County Income Tax: Indiana requires withholding of county income tax where applicable. The rate depends on the employee’s county of residence.

Other Mandatory Payroll Considerations

• Unemployment Insurance Taxes: While not withheld from employee wages, employers must pay Indiana unemployment insurance taxes based on payroll.
• Recordkeeping and Reporting: Maintain accurate withholding records and submit payroll tax reports timely to both federal and state agencies.

As of 2026, employers should regularly review IRS and Indiana Department of Revenue updates to ensure withholding rates and requirements remain current. Using payroll automation software can help streamline withholding accuracy and compliance.