Indiana Administrative Code › Title 45 - DEPARTMENT OF STATE REVENUE › Article 3.1 - ADJUSTED GROSS INCOME TAX › Rule 1 - State Adjusted Gross Income Tax › Section 1-100 - Withholding from certain types of employees and incomes

Current through July 10, 2024
Authority: IC 6-8.1-3-3
Affected: IC 6-3-4-8; IC 6-3-4-8.1; IC 6-3-4-9; IC
				  6-8-8-1
Sec. 100.
Withholding Information For Part-Time Employees and Other
				  Miscellaneous Withholding Requirements. WITHHOLDING FROM INCOME OF PART-TIME OR
				  "SUMMER" EMPLOYEES
Withholding agents are required to withhold tax, at the
				  applicable rate stated on the rate schedules, from the income of part-time or
				  "summer" employees just as though they were full-time or permanent employees.
				  The fact that the employer or the employee are reasonably, or even absolutely,
				  certain that the employee will not earn income in excess of his or her
				  $1,000.00 exemption has no bearing on withholding the tax by the withholding
				  agent. Similarly, the Internal Revenue Service rules which allow the employee
				  to waive withholding, for federal tax purposes, when the income is not expected
				  to be in excess of the Federal filing requirements and income allowances, have
				  no bearing on withholding taxes from the income of part-time employees for
				  Indiana tax purposes. WITHHOLDING FROM SUPPLEMENTAL UNEMPLOYMENT COMPENSATION
				  BENEFIT INCOME
Supplemental Unemployment Compensation Benefits paid to an
				  individual are treated as if they were income, to the extent such benefits are
				  includable in the gross income of such individuals, and therefore are subject
				  to withholding by the withholding agent for Indiana tax purposes. WITHHOLDING
				  FROM PENSION INCOME AND ANNUITY PAYMENTS
Withholding is not required on pension and annuity payments
				  that meet certain qualifications of the Internal Revenue Service, unless the
				  recipient requests that federal income tax be withheld. If such a request is
				  made, the payor must also withhold and remit Indiana adjusted gross income
				  tax.
Pensions and annuities that do not meet the Internal Revenue
				  Service qualifications are considered to be deferred compensation and,
				  therefore, require withholding in the same manner as for wages and salaries.
				  WITHHOLDING FROM AGRICULTURAL OR CASUAL EMPLOYEES
Withholding agents are not required to withhold Indiana state
				  income tax from payments made to agricultural laborers or casual laborers, such
				  as yardworkers, or domestic employees. Withholding of taxes in such cases must
				  be agreed to by both employer and employee. If the employer does not withhold
				  taxes he should report total annual payments made to each such employee on the
				  Federal Form 1099, or the Indiana Form IT-12A. WITHHOLDING FROM ATHLETES AND
				  ENTERTAINERS
Athletes and entertainers generally perform under one of the
				  three following types of contracts:
(1) Employees of the promoter or
				organizer
(2) "Independent
				contractors"
(3) Employees of a
				"production company"
The different types of contracts have different withholding
				  requirements and thus, must be treated separately.
(1) The first situation involves athletes and
				entertainers performing on a salaried basis for example, basketball, hockey,
				and baseball players. These performers are under contract for a specific time
				period and they receive a predetermined salary regardless of the number or the
				location of performances.
Based on these facts, athletes employed by an Indiana
				  professional sports team or an Indiana promoter incur a tax liability on their
				  entire salary. No apportionment will be permitted for out-of-state appearances
				  because the athlete's compensation is unaffected by such appearances.
Because these performers are considered to be employees,
				  withholding is required on their salaries in accordance with the provisions of
				  Regulation 6-3-4-8(010)
[ 45 IAC 3.1-1-97 ]
. Because this
				  compensation is considered to be salary, the reciprocal agreements defined in
				  Regulation 6-3-5-1 (010)
[ 45 IAC 3.1-1-115 ]
are
				  applicable.
(2) The second
				situation involves performers who directly receive payment for Indiana
				performances. This situation might include performers in tennis and golf
				tournaments, nightclubs, and concerts. These performers are not engaged in an
				employer-employee relationship.
Based on these facts, "independent contractors" incur a tax
				  liability by performing within Indiana. Independent contractors who are Indiana
				  residents are taxable on their entire income, but may receive a credit for
				  taxes paid to other states in accordance with Regulation 6-3-3-3(a)(010)
[ 45 IAC 3.1-1-74 ]
. Because this income is not wages or
				  salary, reciprocity will not apply.
Withholding is not required on this income since it is not
				  wages or salary. These individuals are, however, required to make estimated tax
				  payments if they expect to have an Indiana income tax liability of $100 or
				  more. (See Regulation 6-3-4-4(010)
[ 45 IAC 3.1-1-92 ]
.
There are several means of enforcing the income tax liability
				  of an independent contractor. The Department may issue a jeopardy assessment
				  against a taxpayer in accordance with the provisions of Regulation
				  6-3-6-1(g)(010). This same regulation allows the Department to accept a surety
				  bond from the taxpayer. In addition, the Reciprocal Full Faith and Credit Act
				  (IC 6-8-8-1 et seq.) authorizes the Department to bring suit against a taxpayer
				  in his or her state of residence.
(3) The third situation arises when a
				performer organizes a "production company" to receive payment for his
				performances rather than receiving payment directly. The production company
				then pays the performer a salary.
The withholding requirements for payments made to a
				  production company vary. If the company is incorporated, gross income tax must
				  be withheld from any payments, as provided in IC 6-2-1-22(f)
[Repealed
				  by P.L. 77-1981, SECTION 22. Recodified as IC 6-2.1-6-1.]
If the
				  company is a partnership or a sole proprietorship, withholding is not required;
				  however, the partners or proprietor are required to make estimated tax payments
				  as provided in Regulation 6-3-4-4(010)
[ 45 IAC 3.1-1-91 ]
.
				  Enforcement of the tax liability in case of a failure to make estimated tax
				  payments is accomplished through the means outlined above for enforcing the
				  liability of an independent contractor.
The withholding requirements for payments made by a
				  production company to its employees vary. If the employees are paid on a
				  salaried basis, their situation is analogous to that of professional team
				  athletes explained above, and withholding is required if the production company
				  has an Indiana business situs, or if the employee is an Indiana resident.
				  Payments made to those who are not employees i.e., payments made on a
				  per-performance basis, do not require withholding because this income is not
				  wages. The recipient must make estimated tax payments, and enforcement is
				  identical to the enforcement of the liability of independent
				  contractors.