Unlike the neighboring states of Washington, Wyoming, and Nevada, Idaho does have an income tax. The state requires employers to withhold these taxes from employee paychecks.
In addition, the Gem State levies a corporate tax that businesses alone must pay. Here’s what you need to know if you’re an Idaho-based employer or have employees who live and work in the state.
Idaho Payroll Taxes Overview
If you’re a payroll manager in Idaho, you need to have a firm understanding of Idaho’s payroll taxes and laws.
Our overview gives you a snapshot to start with. We’ll also link to relevant state websites that can give you a deeper understanding of what you need to do.
Here’s the key information you should know:
- State Income Tax: Idaho levies a graduated state income tax that ranges from 1 to 6% of a person’s income. Anyone who earns money from Idaho sources or who lives and works in the state is subject to this tax.
- Local Taxes: Idaho has a state sales tax rate of 6%. If cities wish to impose sales taxes, voters can approve a sales tax of up to 3%. Resort towns like Sun Valley, Sandpoint, and Cascade all charge local sales tax.
- Minimum Wage: The Gem State follows the federal minimum wage of $7.25 per hour. Tipped employees are exempt from this and must only receive a minimum wage of $3.35 per hour. New hires under the age of 20 are somewhat exempt, too: for the first 90 days of their employment, their minimum wage is $4.25 an hour.
- State Unemployment Tax: Idaho levies a standard 1.0% unemployment tax rate on a wage base of $49,900. If businesses have a positive balance in the unemployment fund compared with other Idaho employers, their rates may be lower. The state notifies employers of their unemployment tax rate each December.
- Workers Compensation: All employers with one or more seasonal, occasional, part-time, or full-time employees must provide worker’s compensation insurance. Independent contractors are not included in this requirement. However, employers will face a penalty if they misclassify employees as independent contractors and fail to provide them with worker’s comp.
- Meal Breaks: Idaho does not require employers to provide meal breaks or any breaks unless the employer’s policy dictates otherwise.
Idaho doesn’t require employers to provide paid family and medical leave to employees. But under federal law, qualifying employees are entitled to 12 weeks of job-protected family and medical leave.
Remember that this overview only covers the main state-specific laws. You still have to account for all the federal taxes and labor laws, too. And don’t forget the Gem State’s corporate tax, which is 6%. Learn more about Idaho’s corporate tax rules.
How to Withhold Idaho Income Taxes for Payroll
The first step in withholding Idaho income tax is to create an Idaho withholding account with the Idaho State Tax Commission. You must do this as soon as you plan to hire an employee, and you’ll use your federal Employer Identification Number (EIN) to apply for this account.
If you’re a new business and haven’t registered your entity with the state of Idaho, you’ll have to do that first. Depending on the type of business you do, you’ll need to acquire different tax permits.
Each of your employees must fill out an Employee’s Withholding Allowance Certificate (Form ID W-4). Employers must keep a Form ID W-4 on file for each employee.
You must use the W-4 to withhold the appropriate amount of taxes on these types of income:
- Wages
- Tips
- Vacation allowances
- Bonuses
- Awards
- PTO payouts or cashouts
- Commissions
- Fringe benefits
- Some types of reimbursements
- Wages paid using compensation other than money
- Stock options
The Idaho State Tax Commission will tell you when you need to file tax returns: annually, quarterly, semi-monthly, or monthly.
The withholding due dates and corresponding payroll forms are as follows:
- Form 967 (Idaho Annual Withholding Report) and W-2s (Wage and Tax Statement): Due the final day of January
- Form 1099s (Information Returns): Due the final day of February
- Form 910 (Idaho Withholding Payment Voucher) for monthly filers: Due on the 20th of the month after the pay period
- Form 910 for semi-monthly filers: Due the 20th of the month (for the 1st through 15th of the month) and on the 5th of the following month (for the 16th through the end of the month)
- Form 910 for quarterly filers: Due the final day of the month after the end of a quarter
- Form 910 for annual filers: Due the final day of January
All employers must submit a Form 910 for paper checks, but not if they pay taxes online. If you are paying taxes in excess of $100,000 in one filing period, you must pay via electronic funds transfer. The Gem State offers several different ways for employers to pay taxes online, which is the easiest way to do this important task.
How to Withhold Idaho Unemployment Taxes for Payroll
Employers must report and pay unemployment insurance taxes every quarter. Both the payments and reports are due on the final day of the month following the end of the calendar quarter. The state does not offer a grace period on unemployment taxes, so make sure you put about 20 reminders in your calendar.
All employers need to use the state’s online portal to report and pay unemployment insurance taxes. You can only file by mail if you can prove to the state that you can’t file online.
Idaho Paycheck Laws
Now that you know what the deal is with Idaho’s payroll taxes, let’s get into the rules you need to follow for each pay period.
Employers have to pay employees at least once a month within 15 days of the end of a pay period. The specific pay dates must be assigned in advance—you can’t just pay employees on the 24th of one month and the 31st or 1st of another as you see fit.
The final paycheck laws are the same whether an employee quits, is fired, or is laid off. All wages due must be paid on the next scheduled payday or within 10 business days of the separation of employment—whichever is sooner.
As for pay stubs, Idaho only requires that an employer tell employees the details about their pay. This vague instruction doesn’t specify whether the pay stub must be written out in a formal way. It also doesn’t say what, exactly, should be on it.
We suggest sticking with following HR best practices. In other words, provide a formal pay stub each pay period with details on hours worked, wages, paid, and taxes and insurance premiums deducted. A good payroll software service makes this super easy.
That way, if there’s a misunderstanding or mistake later on, you can quickly pinpoint and solve the problem. Just make sure you hang on to each employee’s employment records, including payroll information, for at least three years. It’s required by Idaho law.
New Hire Reporting for Idaho Payroll
When you hire a new employee in Idaho, you have 20 days to report the employee to the Idaho Department of Labor. You’ll need to include your own name, address, and EIN, along with the employee’s:
- Name
- Address
- Social Security Number
- Start date
And unless you’re exempt from providing unemployment insurance, you’ll need to have your state unemployment insurance account number handy, too.
The easiest way to report a new hire is via Idaho’s New Hire Directory.
