If your small business has employees working in Georgia, you’ll need to withhold and pay Georgia income tax on their salaries. This is in addition to having to withhold federal income tax for those same employees. Here are the basic rules on Georgia state income tax withholding for employees.
With rare exceptions, if your small business has employees working in the United States, you’ll need a federal employer identification number (EIN). You should obtain your EIN as soon as possible and, in any case, before hiring your first employee. EINs are issued by the IRS and you’ll need one first and foremost for federal taxes. In addition, some states use the federal EIN for state withholding tax purposes. Other states (like Georgia) issue separate state tax ID numbers. You’ll need an EIN to register with the state (see below). You can apply for an EIN at IRS.gov. Generally, if you apply online, you will receive your EIN immediately.
Apart from your EIN, you also need to establish a Georgia withholding tax account with the Georgia Department of Revenue (DOR). You set up your account by registering your business with the DOR either online or on paper. To register online, go to the DOR’s Georgia Tax Center (GTC) website. To register on paper, contact the DOR’s Registration & Licensing Unit by phone or by email to request an application for a withholding number.
All new employees for your business must complete a federal Form W-4 and the related Georgia Form G-4, State of Georgia Employee's Withholding Allowance Certificate. If an employee does not provide a Form G-4, you are required to withhold tax as though the employee is single with zero allowances. You can download blank Form G-4s from the forms section of the DOR website (click on the “Withholding” link). You should keep the completed forms on file at your business and update them as necessary.
In Georgia, there are five possible payment schedules for withholding taxes: next-business-day, semi-weekly, monthly, quarterly, or annually. Your payment schedule ultimately will depend on the average amount you withhhold from employee wages over time. The more you withhold, the more frequently you’ll need to make withholding tax payments. Next-business-day payments only apply in cases of very high daily withholding and are not covered here.
The exact threshold dollar amounts for the different payment schedules, as well as other rules, may change over time, so you should check with the DOR at least once a year for the latest information.
Due dates for payments are:
If a payment is due on a weekend or holiday, the due date is extended to the next business day.
Employers on a semi-weekly payment schedule must pay by electronic funds transfer (EFT). Monthly and quarterly payers who withhold more than a certain total quarterly amount also must pay by EFT. Other employers can pay by EFT or on paper (by check). You can pay electronically through the DOR’s Georgia Tax Center (GTC) website (there is a convenience fee if you pay by credit card).
Payments on paper must be filed with the correct payment voucher or return. Monthly filers use Form GA-V,Withholding Payment Voucher. A Form GA-V is not required if no tax was withheld for a particular month or payment was made by EFT. Quarterly and annual payers use Form G-7, Quarterly Return for Quarterly Payer. A Form G-7 must be filed even if no tax was withheld for a particular quarter. You can download payment-related forms from the forms section of the DOR website (click on the “Withholding” link). Forms also can be filed online using the GTC website.
The DOR provides several different methods for calculating how much tax to withhold. For more information, check the current version of the DOR’s Employer’s Tax Guide. The guide is updated every year. You can download a copy from the forms section of the DOR website.
Apart from making scheduled tax payments, businesses making payments on a semi-weekly or monthly schedule also must file quarterly withholding tax returns. (Quarterly and annual filers only need to file the correct version of Form G-7 as mentioned in the preceding section.) The returns reconcile the tax paid for the quarter with the tax withheld for the quarter. Semi-weekly payers use Form G-7/Schedule B, Quarterly Return for Semi-Weekly Payer. Monthly payers use Form G-7, Quarterly Return for Monthly Payer. The correct version of Form G-7 must be filed for every quarter even if no tax is due. Both types of return G-7 are due on or before the last day of the month following the end of the quarter:
Returns can be filed online using the GTC website. As with tax payments, any return due date that falls on a weekend or state recognized holiday is adjusted to the next business day.
After the end of the year, you must file an annual reconciliation with the DOR that summarizes the employee taxes you’ve withheld during the year. The annual reconciliation is in addition to providing each of your employees with a federal Form W-2 summarizing the employee’s withholding for the year. You must include copies of the W-2s sent to all of your employees working in Georgia with the annual reconciliation. If you file and pay electronically during the year, you also must file the annual reconciliation and copies of W-2s electronically. In addition, employers who are federally required to file W-2s electronically also must file them electronically for Georgia purposes. Other employers can file either electronically or on paper. Electronic filers use the GTC website. Paper filers use Form G-1003, Income Statement Return.
The annual reconciliation is due on or before the last day of February. As with tax payments and returns, if that date falls on a weekend or state recognized holiday it is adjusted to the next business day.
This article is only concerned with employees, not independent contractors. In general, different tax rules apply to independent contractors.
You may decide that it’s easiest to hand over responsibility for payroll, including withholding taxes, to an outside payroll service. If so, keep in mind that your business, or even you personally, may still be held directly responsible for mistakes made by an outside payroll company.
This article touches on only the most basic elements of Georgia employee withholding taxes. Under Georgia law, any withholding agent (which includes employers) generally will be held liable for required withholding taxes. Avoid possible penalties for making mistakes by checking both the IRS and DOR websites for the latest information. You also can get more information about small business tax issues in other articles here on Nolo.com.