If your small business has employees working in Mississippi, you’ll need to withhold and pay Mississippi 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 Mississippi 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 Mississippi) 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 the IRS website (www.irs.gov). Generally, if you apply online, you will receive your EIN immediately.
Apart from your EIN, you also need to establish a Mississippi withholding tax account with the Mississippi Department of Revenue (DOR). Register online using the DOR’s Taxpayer Access Point (TAP). Your account information should be available to you within minutes of completing online registration. After registering, you should also receive a letter from the DOR with information about withholding tax, due dates, and filing requirements. There is no fee to register your business with DOR.
All new employees for your business must complete both a federal Form W-4 and the related Mississippi Form 89-350, Mississippi Employee's Withholding Exemption Certificate. You can download blank Forms 89-350 from the withholding tax section of the DOR website. You should keep the completed forms on file at your business and update them as necessary.
In Mississippi, there are two payment schedules for withholding taxes: monthly or quarterly. Your payment schedule ultimately will depend on the average amount you hold from employee wages over time. The more you withhold, the more frequently you’ll need to file returns and make withholding tax payments. The DOR will notify you of your return and payment schedule. 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.
For both monthly and quarterly filers, due dates for returns and payments are the 15th day of the month following the pay period (month or quarter). If a due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day.
Mississippi employers with higher levels of withholding tax liability are required to file returns and payments electronically. File electronically using the DOR’s Taxpayer Access Point (TAP). If a business files on paper (typically because it has no Internet access), the DOR should send coupons (also known as a Withholding Tax Return, Form 89-105). Returns must be filed even if no tax is due.
The DOR advises you to use its tax tables to calculate how much tax to withhold. For more information, check DOR Publication 89-700, Withholding Income Tax Tables and Employer Instructions, which you can download from the withholding tax section of the DOR website.
After the end of the year, you must file an annual information return with the DOR that summarizes the employee taxes you’ve withheld during the year. The annual information return is in addition to providing each of your employees with a federal form W-2 summarizing the employee’s withholding for the year. Use Form 89-140, Annual Information Return. You also must file copies of the federal W-2s sent to all of your employees working in Mississippi. Larger employers (those with more than a maximum number of W-2s) must submit W-2s electronically using the DOR’s Taxpayer Access Point (TAP). W-2s filed on paper are due by the last day of February. All information returns are due by the last day of March. If the due date falls on a weekend or state holiday, the filing due date is the next business working 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 Mississippi employee 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.