If your small business has employees working in Oklahoma, you’ll need to withhold and pay Oklahoma 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 Oklahoma 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 Oklahoma) 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.
Apart from your EIN, you also need to establish an Oklahoma withholding tax account with the Oklahoma Tax Commission (OTC). You set up your account by registering your business with the OTC either online or on paper. To register online, go to the Online Business Registration section of the OTC website. (A link will take you to the Oklahoma Taxpayer Access Point (OkTAP).) Processing of an online application takes a minimum of 5 days. To apply on paper, use Form WTH10006, Oklahoma Wage Withholding Tax Application. You can download blank forms from the Business Forms section of the OTC website. You must submit Form WTH10006 by regular mail. If you register on paper, it can take up to six weeks to receive a state tax ID number. There is no fee to register your business with the OTC.
All new employees for your business must complete a federal Form W-4. Unlike some other states, Oklahoma does not also require 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. Keep the completed forms on file at your business and update them as necessary.
In Oklahoma, there are three possible payment schedules for withholding taxes: semi-weekly, 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 make withholding tax payments. If you have been paying quarterly but withhold more than a certain amount during a particular quarter, you will have to pay monthly going forward.
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 OTC at least once a year for the latest information.
Here are the due dates for the various payment schedules:
If the payment is due on a weekend or holiday, the due date is the next business day.
If you pay on a semi-weekly schedule you must make payments by electronic funds transfer (EFT). If you pay monthly or quarterly, you can pay online or on paper. You can make online payments through the OkTAP website. Alternatively, if you do not elect to file and pay electronically, the OTC will periodically mail blank payment coupons and tax returns to you. You can also download blank forms from the Business Forms section of the OTC website. Use Form WTH10004, Oklahoma Withholding Payment Coupon to mail in your monthly or quarterly payments.
The OTC provides several different methods for calculating how much tax to withhold. For more information, check the current version of OTC Packet OW-2, Oklahoma Income Tax Withholding Tables, which is updated every year.
Apart from making scheduled tax payments, businesses on a monthly or quarterly payment schedule also must file withholding tax returns. You only need to file a return if you are not paying via EFT. Use Form WTH10001,Oklahoma Wage Withholding Tax Return. This return must be filed by mail. The due date is the same as for your monthly or quarterly tax payment.
The federal government and many other states require employers to file an annual reconciliation after the end of the year. (For the federal government, this generally is IRS Form W-3 with copies of Form W-2s attached.) The annual reconciliation, where required, is in addition to the requirement to provide each of your employees with a federal form W-2 summarizing the employee’s withholding for the year. Oklahoma, however, does not require you to file an annual reconciliation.
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 Oklahoma employee withholding taxes. Oklahoma law states that you may be personally liable if: (a) you are an officer of a corporation, a member of a partnership, or an individual employer; (b) are under a duty to withhold and remit Oklahoma income withholding tax; and (c) fail to properly 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.