Arkansas addresses withholding of tax on pay for domestic services

The Arkansas Department of Finance and Administration has issued a legal opinion stating that Arkansas income tax withholding is not required on remuneration paid for domestic services performed by a “sitter” unless the remuneration is $2,500 or more in a year. Generally, the withholding of state income is not required on remuneration paid for domestic services because such remuneration does not fall within the definition of “wages” for withholding tax purposes. However, in cases where the remuneration is $2,500 or more in a year, the person making the payment must issue a Form 1099 to the person rendering the services and a copy of the form must be provided to the department within the statutory time frames. If the person making the payment fails to issue the required Forms 1099, the department is authorized to withhold income tax from the remuneration paid. Further, the person may be personally held liable for not withholding income tax if the department requires such withholding. (Arkansas Department of Finance and Administration, Revenue Legal Counsel, April 6, 2017.)

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