42.17.103    OTHER PAYMENTS; DESIGNATED DISTRIBUTIONS; ELECTION TO WITHHOLD

(1) Employee contributions to pensions, profit sharing, stock bonus, or annuity plans, deferred compensation and cafeteria plans where the payments are not otherwise considered wages, an IRA, or commercial annuity contracts are exempt from withholding to the extent that the contributions are not includable in the employee's adjusted gross income for federal income tax purposes.

(2) Sick pay paid by a third party is not subject to withholding taxes unless the payor receives a written request from the employee, or the employer and the third party entered into an agreement that makes the third party responsible for the reporting and payment of withholding taxes. When a third party reports and pays withholding taxes, the third party must use its own name and tax identification number instead of the employer's.

(3) A recipient of any designated distribution from a deferred compensation plan, individual retirement plan, or commercial annuity, as defined in IRC 3405, may elect to have the payor withhold state income tax from these payments by filing a Form MW-4 with the payor.

(a) The recipient's tax withholding election shall specify a flat dollar amount of income tax to be withheld by the payor from each designated distribution or a number of allowances claimed by the recipient to be used with the withholding tax tables provided by the department. The election shall also specify the name, current address, and taxpayer identification number of the recipient. Any change or revocation of a previously filed election shall include the same information as required in this rule for an initial election except the recipient should indicate whether a change or revocation of a previously filed election is being made. In this case, the payor shall remit the withholding tax to the department as required in ARM 42.17.113.

(b) The payor has the option to choose not to withhold from any designated distribution if the amount to be deducted and withheld is less than $10. Additionally, income tax withholding by the payor from any designated distribution shall not be required if the amount to be withheld would reduce the net amount of the distribution to less than $10.

(c) The payor of distributions, made up in whole or in part of contributions made pursuant to (1) or solely of employer contributions, shall notify the recipients of the availability to state withholding and the requirements for the payment to state income tax on the taxable portion of a distribution.

(i) Payors shall notify recipients of the state requirements at the same time recipients are notified of the federal election requirements under IRC 3405(d)(10)(B).

(ii) Payors shall notify recipients at the time of distribution and yearly thereafter.

 

History: 15-30-2620, MCA; IMP, 15-30-2501, MCA; Eff. 12/31/72; AMD, Eff. 10/5/74; AMD, 1982 MAR p. 296, Eff. 2/12/82; AMD, 1983 MAR p. 1465, Eff. 10/14/83; AMD, 1984 MAR p. 2032, Eff. 12/28/84; AMD, 1988 MAR p. 392, Eff. 2/26/88; AMD, 1996 MAR p. 1169, Eff. 4/26/96; AMD, 1996 MAR p. 2610, Eff. 10/4/96; AMD, 2001 MAR p. 1650, Eff. 8/24/01; AMD, 2004 MAR p. 2754, Eff. 11/5/04; AMD, 2010 MAR p. 177, Eff. 1/15/10; AMD, 2019 MAR p. 2384, Eff. 12/28/19.