Form AR4EC: Employee’s Withholding Exemption Certificate

Form AR4EC: Employee’s Withholding Exemption Certificate - Key Takeaways

• Form AR4EC is used by Arkansas employees to declare the number of state tax withholding exemptions.
• Employers must collect this form upon hiring and use it to calculate accurate state tax withholding.
• Recent Arkansas tax updates reduced the personal income tax rate to 3.9% and increased the standard deduction to $2,410.

Form AR4EC serves as a critical document for Arkansas employees to communicate their tax withholding preferences accurately. Proper completion ensures that state income taxes are withheld correctly from wages.

This article explores the form’s components, employer responsibilities, special cases, and recent tax changes affecting Arkansas withholding.

1. Overview of Form AR4EC: Employee’s Withholding Exemption Certificate

Form AR4EC allows employees in Arkansas to specify how many exemptions they are claiming for state income tax withholding purposes. The number of exemptions directly impacts how much state tax is withheld from each paycheck.

Employees must provide key personal information on the form, such as their full name, Social Security Number, and home address, which is necessary for accurate tax processing and record keeping.

Filing Status and Claiming Exemptions on Form AR4EC

The exemptions a taxpayer claims depend on their filing status:

• Single individuals may claim one exemption.
• Married individuals where both spouses are employed can claim two exemptions.
• Head of Household filers are eligible for one exemption.
• Additional exemptions can be claimed for qualifying dependents.

These exemptions reduce the amount of taxable income subject to withholding, helping employees avoid overpaying taxes during the year.

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Optional Additional Withholding Requests

If employees anticipate owing more Arkansas state income tax than what the standard exemptions cover, Form AR4EC allows them to request an extra amount to be withheld from each paycheck. This option helps prevent unexpected tax bills at filing time.

2. Employer Responsibilities Regarding Form AR4EC

Employers in Arkansas must obtain a completed Form AR4EC from every newly hired employee. This ensures that withholding calculations reflect the employee’s correct tax situation.

Once collected, the forms must be securely retained as part of the employer’s tax records. These documents may be required during audits or state compliance reviews.

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Calculating Withholding Using Form AR4EC Information

Employers use the exemptions claimed by the employee, combined with Arkansas’s withholding tax tables, to determine the proper state income tax deduction from each paycheck. It's essential to apply the latest tax rate and standard deduction values to maintain compliance.

Failure to correctly apply exemptions or withholding amounts can lead to underpayment or overpayment of taxes, potentially resulting in penalties for employers or employees.

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3. Special Considerations for AR4EC Tax Withholding

Tax Exemptions for Texarkana Employees

Employees residing in Texarkana, Arkansas, or Texarkana, Texas, who work within the Arkansas side of Texarkana may qualify for exemption from Arkansas state income tax withholding. Those individuals should complete Form AR4EC(TX), the Texarkana Employee’s Withholding Exemption Certificate, instead of the standard AR4EC.

Low-Income Exemption Options in Arkansas

Arkansas offers reduced tax rates for low-income individuals, and employees qualifying for these rates can claim exemption from withholding by completing Form AR4ECSP, the Employee’s Special Withholding Exemption Certificate. This ensures their payroll withholding matches their expected tax liability more closely.

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4. Recent Updates Affecting Form AR4EC Tax Withholding

Starting January 1, 2024, Arkansas reduced its personal income tax rate from 4.4% to 3.9%. This change directly affects the amount of state tax withheld based on the data employees submit on Form AR4EC.

Additionally, the standard deduction amount increased from $2,340 to $2,410, slightly lowering taxable income thresholds for withholding calculations. Employers must ensure they are using updated tax tables and instructions consistent with these changes.

Adhering to these updates helps employees have accurate withholdings aligned with current tax laws and minimizes discrepancies come tax filing season.

5. Best Practices for Employers Handling Form AR4EC

• Collect a completed Form AR4EC from all new hires promptly during onboarding.
• Review the form to confirm all required fields—including name, Social Security Number, and exemptions—are completed.
• Keep completed forms securely filed for recordkeeping and audit purposes.
• Ensure payroll systems use the latest Arkansas withholding tax tables and standard deduction values effective for the current tax year.

Regularly update payroll staff on tax law changes and maintain open communication with employees regarding their withholding allowances to avoid errors or misunderstandings.

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6. Useful Resources for Form AR4EC Completion and Tax Withholding

For more detailed instructions, official forms, and up-to-date tax tables for Arkansas withholding, employers and employees can consult the following resources:

• Arkansas Department of Finance and Administration
• Withholding Tax Forms & Instructions
• Arkansas Taxpayer Access Point (ATAP)
• Arkansas Withholding Tax Employer’s Instructions (PDF)
• Arkansas Withholding Tax Tables (PDF)

Form AR4EC: Employee’s Withholding Exemption Certificate - Conclusion

Form AR4EC is an essential tool for Arkansas employees and employers to ensure accurate state income tax withholding. By correctly specifying withholding exemptions and staying updated on tax rate changes, employees can avoid surprises during tax season.

Employers play a vital role in collecting, maintaining, and applying the information from Form AR4EC to payroll. Adhering to best practices and using official resources ensures compliance and smooth tax administration for all parties involved.

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