Arizona State Income Tax Withholding

Reference Number: NFC-23-1686066172
Published: June 6, 2023
Effective: Pay Period 11, 2023

Summary

The income tax withholding formula for the State of Arizona, includes the following changes:

• The withholding rates have changed.
• The default rate for employees who have not submitted an Arizona Form A-4, Employee's Arizona Withholdings Percentage Election, has changed.

Note: If the employee chooses to use another percentage rate, they must file a new Arizona Form A-4 indicating their selection.

When entering the Arizona State tax percentage, enter the percentage rate as shown below; precede with a zero, but do not enter the decimal point.

Tax Formula

Arizona State Income Tax Withholding Information

State Abbreviation:	AZ
State Tax Withholding State Code:	04
Acceptable Exemption Form:	Based on State taxable wages
Basis for Withholding:	A-4
Acceptable Exemption Data:	0.0, 0.5, 1.0, 1.5, 2.0, 2.5, 3.0, 3.5
TSP Deferred:	Yes
Special Coding:	Arizona State tax is based on a percentage of the Arizona State taxable wages. Determine the Total Number of Allowances field as follows: When the AZ Form A-4 has not been filed, or an invalid status is found for an employee on the database, the employee's taxes will automatically be withheld at the default rate of 2.0%, regardless of his/her annual income. In order to elect a percentage less than or greater than 2.0%, employees must submit Form A-4. The employee can submit Form A-4 for a minimum withholding of 0.5% of the amount withheld for State income tax. An employee required to have 0.5% deducted may elect to increase this rate to 1.0%, 1.5%, 2.0%, 2.5%, 3.0%, or 3.5% by submitting Form A-4. Employees with an exempt status will remain the same. Note: Do not enter the decimal point when entering the percentage in the Total Number Of Allowances Claimed field. For example, to enter 1.0 percent, type 010.
Additional Information:	None

Withholding Formula (Effective Pay Period 11, 2023)

1. Subtract the nontaxable biweekly Thrift Savings Plan contribution from the gross biweekly wages.
2. Subtract the nontaxable biweekly Federal Health Benefits Plan payment(s) (includes dental and vision insurance program, and flexible spending account - health care and dependent care deductions) from the amount computed in Step 1.
3. Add the taxable biweekly fringe benefits (taxable life insurance, etc.) to the amount computed in Step 2 to obtain the adjusted gross biweekly wages.
4. Multiply the biweekly Arizona State taxable wages by the number of pay dates in the tax year to obtain the annual Arizona State tax wages.
5. Multiply the Arizona State Taxable Wages by one of the following amounts corresponding to the employee's election on the AZ Form A-4:

0.0%

0.5%

1.0%

1.5%

2.0%1

2.5%

3.0%

3.5%

1 The default rate will be 2.0% when a valid Form A-4 is not on file.

6. Divide the annual Arizona income tax withholding by the number of pay dates in the tax year to obtain the biweekly Arizona income tax withholding.

Resources

To view the updated tax formula, go to the HR and Payroll Clients page from the MyNFC drop-down menu on the National Finance Center (NFC) homepage. Select the Publications tab and select U.S. Income Tax Formulas from the Publications menu to launch the tax map. Select the desired State from the map provided for the formula.

Previous Tax Bulletin

Inquiries

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