If your small business has employees working in Missouri, you’ll need to withhold and pay Missouri 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 Missouri 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 Missouri) 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 Missouri withholding tax account with the Missouri 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 Missouri Business Portal. To register on paper, use Form 2643, Missouri Tax Registration Application. If you register online, you’ll initially receive a confirmation number and then it will take 5-8 days to process your application. If you register by mail, it should take about 10 days to process your application. 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 Missouri Form MO W-4, Employee’s Withholding Allowance Certificate. You can download blank Form MO-W-4s from the Forms & Manuals section of the DOR website. You should keep the completed forms on file at your business and update them as necessary.
In Missouri, there are four primary payment schedules for withholding taxes: quarter-monthly, monthly, quarterly, or annually. In addition, if your business is only open for several months out of the year, you can register with the DOR as a seasonal employer (not covered here).
Your payment schedule will depend on the average amount you hold from employee wages over time. The more you withhold, the more frequently you’ll need to make withholding tax payments. As a newly-registered employer, you initially will be assigned a payment schedule based on your estimation of future withholdings.
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.
After you register with the DOR, you will be sent a pre-printed voucher booklet with information specific to your business and due dates for your filing frequency.
Here are the due dates for the various payment schedules:
Note: If a payment is due on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. A payment is considered timely if postmarked by the due date.
You must include a return with each of your payments. You must file a return even if you owe no money for a particular pay period. You can file returns on paper or online. When filing on paper, use Form MO-941, Employer’s Return of Income Taxes Withheld.
You can also make payments online by going to the Business Tax section of the DOR website. However, additional convenience charges apply for online payments. Quarter-monthly filers are required to make payments online, but still use Form MO-941 to file monthly reports (also known as reconciliations), which are due the 15th of the month following the month taxes are collected. The reconciliations can be filed online.
The DOR provides several different methods for calculating how much tax to withhold. For more information, download Form 4282, Employer’s Tax Guide from the Forms & Manuals section of the DOR website.
After the end of the year, you must file an annual report form with the DOR that summarizes the employee taxes you’ve withheld during the year. The annual report 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 MO W-3, Transmittal of Tax Statements. You should include copies of the federal W-2s sent to all of your employees working in Missouri. Employers with fewer employees can submit the copies of W-2s on paper, CD, or flash drive. Larger employers must submit copies of W-2s on CD or flash drive. The annual report and all W-2s are due on or before the last day of February. As with tax payments and returns, if the report is due on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day, and reports and W-2s are considered timely if postmarked by the due date.
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 Missouri employee withholding taxes. Under Missouri law, people associated with a business who have responsibility for, or control over, filing returns or making payments for that business, are personally liable for failure to file or pay. 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.