Do you know the income tax rates levied in the cities of Detroit and Pontiac? For the city of Detroit in 2022, residents are taxed at 2.4 percent, and non-residents are taxed at 1.2 percent. In Pontiac, residents are taxed at 1 percent, and non-residents are taxed at .5 percent.
As a business, you’re responsible for making sure that all the applicable taxes and correct tax rates are withheld from your employees’ paychecks, and these rates could change for any year. This means that maintaining compliance with these Michigan city taxes can be difficult and time-consuming.
The good news is that there are ways you can stay up to date with all the local tax codes and simplify your payroll process. Let’s look at the current rates for the cities of Detroit and Pontiac and how you can get and remain compliant with all the local tax laws.
What Are the Current City Taxes for Detroit and Pontiac?
The cities of Detroit and Pontiac both collect city taxes. At your business, it’s your responsibility to withhold the appropriate amount of Federal, state, and local taxes.
Detroit Taxes for 2022
- Detroit Resident Tax Rate – 2.4 percent
- Detroit Non-Resident Tax Rate – 1.2 percent
Pontiac Taxes for 2022
- Pontiac Resident Tax Rate – 1 percent
- Pontiac Non-Resident Tax Rate - .5 percent
Which Businesses Are Required to Withhold Taxes for the Cities of Detroit and Pontiac?
In Detroit, if you’re an employer that does business within the city or has a physical location within the city of Detroit, you must withhold the appropriate city income tax from your employee’s paychecks.
This means that even if you don’t have a physical location within the city but do business there, your employees’ paychecks must have the city of Detroit’s income tax withheld from their checks. If the employee does not live within Detroit, the rate is 1.2 percent. If the employee does live within the city limits, that rate is 2.4 percent.
Pontiac has much the same laws as Detroit. Suppose your business does business inside the city, whether or not you have a physical location inside the city of Pontiac. In that case, you must withhold the local taxes from your employees’ paychecks.
If your employee works and lives inside Pontiac, the tax rate is 1 percent. If the employee lives inside the city but works outside the city and the city where they work does not have a local tax rate, they are also taxed at 1 percent.
Employees who do not live in the city of Pontiac but work in the city of Pontiac are taxed at .5 percent. Additionally, if you have employees who are residents of Pontiac but work in a city outside of Pontiac that also has an income tax rate, they are charged .5 percent.
When Are Local Business Income Taxes Due?
The Michigan Department of Treasury has been processing returns and payments since 2017. Businesses should file their monthly returns and make payments by the 15th of the month following the month when the Michigan city taxes were withheld.
Additionally, businesses are often required to file quarterly taxes and annual reconciliation returns. Quarterly taxes are due on the 15th of the month after the end of the quarter. Annual reconciliation returns and payments are due on the last day of February.
How to Make Sure Your Business Withholds the Correct Amount of Taxes and Pays on Time
Making sure you’re withholding the right amount of money from your employees’ paychecks and paying your monthly and quarterly taxes on time doesn’t have to be challenging with the right payroll software. At Cello HR, we offer a payroll solution that ensures accuracy while simplifying your payroll process. We can even help you navigate the local taxes of Pontiac and Detroit.
Our payroll solution leaves you in control of your payroll process, allows you to streamline and automate some tasks and make changes quickly and easily. You can even run your payroll reports when you need them, and your employees will be given access to various self-help tools through our online portal and mobile app.
To learn more about how our team of experts can help you understand and navigate the Michigan city taxes of Detroit and Pontiac and ensure compliance, schedule a consultation today.