If your small business has employees working in West Virginia, you’ll need to withhold and pay West Virginia 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 West Virginia 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 West Virginia) 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. Generally, if you apply online, you will receive your EIN immediately.
Apart from your EIN, you also need to establish a West Virginia withholding tax account with the West Virginia State Tax Department (STD). You set up your account by registering your business with the Office of Business Registration within the STD. You can register online or on paper. To register online, go the Business4WV website. To register on paper, use Form WV/BUS-APP. You can download blank forms from the Business Forms section of the STD website. Submit Form WV/BUS-APP by regular mail. There is no fee to register your business with the STD for withholding purposes only (other types of registration do require a fee).
All new employees for your business must complete a federal Form W-4 and also should complete the related West Virginia Form WV/IT-104, West Virginia Employee’s Withholding Exemption Certificate. You can download blank Form WV/IT-104s from the STD website. You should keep the completed forms on file at your business and update them as necessary.
In West Virginia, there are two possible payment schedules for withholding taxes: monthly or annually. Employers with very high amounts of withholding for the previous calendar year are also subject to special “accelerated payment” rules (not covered here). Your payment schedule 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. Only employers of household employees or with very low amounts of annual withholding will be on an annual 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 STD at least once a year for the latest information.
Here are the due dates for the two payment schedules:
If the payment is due on a Saturday, Sunday, or holiday, the due date is extended to the next business day.
The STD will send you a booklet of twelve remittance vouchers, one for each monthly payment. You can download blank versions of this voucher, Form IT-101V, from the Withholding Forms section of the STD website. However, the STD prefers all employers to make their payments online through its mytaxes website.
The STD provides several different methods for calculating how much tax to withhold. For more information, check STD Form WV/IT-100.1-A, West Virginia Employer’s Withholding Tax Tables. You can download this publication from the Withholding Forms section of the STD website.
Apart from making scheduled tax payments, businesses on a monthly payment schedule also must file quarterly withholding tax returns. The returns reconcile the tax paid for the quarter with the tax withheld for the quarter. Large employers are required to file the quarterly return online. Other employers can file online or on paper. To file online, use the STD’s mytaxes website. To file on paper, use WV/IT-101Q, West Virginia Employer’s Quarterly Return of Income Tax Withheld. Returns on paper must be filed by mail. You must submit a return even if you had no employees for the quarter and no tax was withheld.
Quarterly returns are due on or before the last day of the month following the close of the quarter:
In addition, businesses on an annual payment schedule must file an annual return, Form WV/IT-101A, West Virginia Employer’s Annual Return of Income Tax Withheld. Just as with monthly payers who must file quarterly returns, annual payers can file annual returns online or on paper, and they must submit a return even if they had no employees and no tax was withheld. The annual return is due January 31st of the following year.
As with tax payments, any return due date that falls on a Saturday, Sunday, or holiday is adjusted to the next business day.
After the end of the year, you must file both an annual return and an annual reconciliation with the STD. 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 should attach copies of the W-2s sent to all of your employees working in West Virginia. Smaller employers can file the annual reconciliation and W-2s online or on paper. Larger employers are required to file online. To file on paper, use Form WV/IT-103, Annual Reconciliation. You can download blank versions of this form from the Withholding Forms section of the STD website. For additional information on filing the annual reconciliation or W-2s electronically, check the current version of Form IT-105, Electronic Media Specifications W-2, available from the Withholding Forms section of the STD website. The annual reconciliation is due on or before the last day of February.
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 West Virginia employee withholding taxes. Under West Virginia law, any person required to collect, account for, and pay withholding tax, who willfully fails to account for and pay that tax, can be held personally liable. Avoid possible penalties for making mistakes by checking both the IRS and STD websites for the latest information. You also can get more information about small business tax issues in other articles here on Nolo.com.