Nebraska Income Tax Withholding Requirements

Learn the rules for Nebraska state income tax withholding for employees.

If your small business has employees working in Nebraska, you’ll need to withhold and pay Nebraska 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 Nebraska state income tax withholding for employees.

Get an EIN

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 Nebraska) 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. Generally, if you apply online, you will receive your EIN immediately.

Register With the Department of Revenue

Apart from your EIN, you also need to establish a Nebraska withholding tax account with the Nebraska Department of Revenue (DOR). You set up your account by registering your business with the DOR either online or on paper. To register online, use the Nebraska One-Stop Business Registration Information System. To register on paper, use Form 20, Nebraska Tax Application. You can submit Form 20 by regular mail or fax. It can take up to two weeks to process Form 20. There is no fee to register your business with DOR. After you register, you’ll be issued a state ID number to use for your withholding taxes.

Have New Employees Complete a Federal Tax Form

All new employees for your business must complete a federal Form W-4. Unlike many other states, Nebraska does not have a separate state equivalent to Form W-4, but instead relies on the federal form. You can download blank Forms W-4 from irs.gov. Clearly label W-4s used for state tax withholding as your state withholding form. You should keep the completed forms on file at your business and update them as necessary.

File Scheduled Withholding Tax Payments and Returns

In Nebraska, there are three possible payment schedules for withholding taxes: monthly, quarterly, or annually. Your payment schedule ultimately will depend on the average amount you hold from employee wages each month. The more you withhold, the more frequently you’ll need to make withholding tax payments.

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.

Here are the due dates for the various payment schedules:

  • Monthly: For months that are not also the end of calendar quarters, payments are due by the 15th day of the month following the month in which the tax was withheld. For the four months that are also the end of calendar quarters (March, June, September, and December), payments are due by the last day of the month following the month in which the tax was withheld.
  • Quarterly: Payments are due by the last day of the month following the end of the quarter.
  • Annually: Payment is due by the last day of January for the previous calendar year.

If the payment is due on a Saturday, Sunday, or holiday, the due date is extended to the next business day.

You can make payments by mail. The DOR should send you pre-identified forms shortly before they are due. Monthly filers use Form 501N, Nebraska Monthly Income Tax Withholding Deposit to make payments for the eight months that are not at the end of calendar quarters, and Form 941N, Nebraska Income Tax Withholding Return to make payments for the four months that are at the end of calendar quarters. Quarterly filers use Form 941N to make their payments. Annual filers, too, use Form 941N to make their one annual payment. You must file Form 941N regardless of whether payments were made during the quarter.

You can also make payments and file returns online. There are multiple options for paying electronically, such as the DOR’s E-Pay System and using Official Payments (which involves an additional fee). You can file quarterly returns through the DOR’s business e-filing website. Employers with total payments exceeding certain amounts in a prior year are required to file and pay electronically. Check the DOR website for more information about threshold amounts for required electronic payments.

The DOR provides several different methods for calculating how much tax to withhold. For more information, check the current version of the DOR’s Circular EN, Income Tax Withholding Tables and Instructions for Employers, which is available for download from the withholding tax section of the DOR website. The circular is updated every few years.

Complete an Annual Reconciliation

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. If filing on paper, use Form W-3N,Nebraska Reconciliation of Income Tax Withheld. You should receive a pre-identified Form W-3N in advance of the due date. You should attach copies of the federal W-2s sent to all of your employees working in Nebraska. Alternatively, you can e-File the W-2s through the DOR’s business e-filing website. Larger employers with more than a certain number of employees must e-File W-2s (check the Form W-3N instructions for the latest information). You can also e-File Form W-3N through the business e-filing website. The annual reconciliation is due on or before February 1.

Independent Contractors are Not Employees

This article is only concerned with employees, not independent contractors. In general, different tax rules apply to independent contractors.

Using Payroll Service Companies

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.

Additional Information

This article touches on only the most basic elements of Nebraska 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.

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