Indiana Department of Revenue posts its Revised Departmental Notice #1

The Indiana Department of Revenue (the “Agency”) has posted a revised Departmental Notice #1 (“Notice”) with the effective date of October 1, 2007. This document provides information on how to compute withholding for state and county income taxes as well as a detailed list of all county tax rates. A copy of the revised notice can now be found on the Agency’s website located at http://www.state.in.us/dor/reference/notices/pdfs/dn01.pdf.

It is important to note, as provided on the Notice, that the deadline for counties to change or adopt new local-option income tax rates has been extended to December 31, 2007, and because of this extension, county tax rates may be updated through the remainder of 2007.   

Frequently Asked Questions

How do I know if I'm affected?

You may be affected if you currently withhold Indiana state and county income taxes from employee’s wages or have a valid Indiana Taxpayer ID Number.

What steps do I need to take next?

1.       View Page 2 of the Notice to see if any of your employee’s county tax rates has changed. Rate increases or decreases will be noted by an asterisk (*). 

2.       If your employee’s county tax rate has changed or if you want to verify your employee’s county tax rate in QuickBooks:

a.       For QuickBooks 2005, go to the Employee List.  For QuickBooks 2006 and higher, go to the Employee Center .  Double click on a subject employee. In the Change tabs dropdown, select Payroll and Compensation Info. Then select Taxes and then the Other tab. In the designated area for Indiana County %, enter the county tax rate as a percent.  For example, the Resident Rate for Adams County lists 0.01124.  Convert and enter the rate in QuickBooks as a percentage of 1.124%. Click OK twice. 

b.       Change the county tax rate for each subject employee.