How to Do Payroll in Montana

The state of Montana does not require an employer to provide a W-2. Instead, businesses use the “Montana Tax Information System” (MTIPS) for payroll purposes and any necessary tax filings. However, MTIPS is only available online on the Business Portal website or via fax. What options do employers in this situation have?

Montana withholding form is a document that must be filled out when you are doing payroll. The form will help ensure your employees get the correct amount of taxes taken out of their paychecks.

Payroll in Montana isn’t difficult, but it does need familiarity with state income tax rates. Payroll laws, for the most part, match with federal regulations, so you won’t have to deal with any inconsistencies. We’ll go through how to make payroll in Montana, as well as the most essential HR rules affecting employee labor and salaries.

Montana (like other states) has penalties for late payments and noncompliance, so if you’re worried about getting it right, use payroll software like Gusto. It will cover any penalties you incur if you pay and submit payroll taxes on time. You may provide chosen perks in addition to direct deposit.

A Step-by-Step Guide to Payroll Processing in Montana

Step 1:

Register your company as an employer. You must apply for an Employer Identification Number (EIN) and open an account in the Electronic Federal Tax Payment System on the federal level (EFTPS).

Step 2:

Go to the Montana Department of Revenue and register. You’ll need your EIN, the dates your workers began working in Montana, and basic contact information, as well as your legal business and trade name or DBA (DBA). You may create a TransAction Portal (TAP) account after you’ve been accepted.

You must also register with the Montana Unemployment Benefits Division for an employer account number. Online registration is available, or the Montana UI-1 may be sent to:

Helena, Montana 59604-6339 Unemployment Benefits Division P.O. Box 6339

Step 3:

Create a payroll system. Montana has limited pay frequency regulations, allowing you to select the optimum plan for your company and employees. The standard is every two months. You’ll also need to select how you’ll pay your employees—the most convenient method is direct deposit, although checks and cash payments are also acceptable.

Step 4:

Collect employee payroll paperwork in step four. The quickest way to collect payroll paperwork is to do it during onboarding. W-4, I-9, and direct deposit information are among the forms. Form MW-4 is required for Montana.

Step 5:

Collect, evaluate, and approve timesheets in step 5. Unless a timesheet is handed in late, you must pay workers within 10 days of the pay period ending, therefore it’s critical to collect and approve work hours for all hourly-rate employees. Many small firms use a free timesheet template to build their own timesheets. Time and attendance software might also help.

Step 6:

Work out your payroll and pay your staff. To figure up payroll, you’ll need to add up numerous numbers, such as total work hours, gross pay, taxes and withholdings, and so on. An Excel payroll template and payroll software may help you save time and money by automating your payroll calculations. You have the option of paying workers by direct deposit, cheque, cash or pay card.

Step 7:

File payroll taxes with both the federal and state governments in Montana. You may pay your federal taxes online utilizing the EFTPS system. Montana has its own set of restrictions.

• Montana Income Taxes: You will get a payment schedule from the state. If you choose, you may pay withholdings at the end of each pay period.
• Taxes on state Unemployment Benefits (SUTA): These taxes must be paid online. The following dates are the deadlines for reports and payments:

If a report or tax payment is due on a Saturday, Sunday, or legal holiday, the report or payment is deemed timely if it is received on or before the next working day.

Step 8:

Keep track of your payroll data. According to Montana Rule 42.17.203, you must preserve records for all of your workers for at least five years, even those who have been fired. Learn more about keeping payroll records in this post, and consult the Montana regulation for specifics on what information you preserve. Payroll records must be kept for a minimum of three years and payroll tax records for a minimum of four years, according to federal law. Follow the most stringent guidelines.

Step 9:

Complete your year-end payroll tax returns. By January 31 of the following year, send federal Forms W-2s (for employees) and 1099s (for contractors), as well as MW-3s. You may send MW-3s, W-2s, and 1099s to the state through your TAP account or by mail to the following address:

P.O. Box 5835 Helena, MT 59604-5835 Montana Department of Revenue

Montana Payroll Laws, Taxes & Regulations

To begin, you must comply with federal income tax, Social Security and Medicare (FICA), and federal Unemployment Benefits laws (FUTA). FICA taxes of 6.2 percent (Social Security) and 1.45 percent (Medicare) will be due (Medicare). You should deduct such sums from each employee’s compensation and pay them from your company’s bank account.

Taxes in Montana

Income Taxes at the State and Local Level

Individuals who earn money in Montana by providing services are liable to state income tax, which you must withhold. Exemptions apply to the following individuals:

• Military spouses in the United States
• Residents of North Dakota
• Workers who are subject to the laws of the Interstate Commerce Commission
• Native Americans are a group of people that live in
• H-2A visa holders are foreign agricultural laborers.

The Montana Withholding Tax Guide contains a comprehensive list of particular circumstances.

The tax withholdings table in the booklet shows how much to withhold every paycheck depending on income and withholdings. Montana has a progressive state income tax with a maximum rate of 6.9%.

The amount you retained during the previous year’s look-back period determines your Montana income tax withholding schedule; any modifications to your payment schedule will be communicated to you by Nov. 1.

Taxes Must Be Paid On Time! Unpaid taxes are subject to a late penalty of 1.5 percent every month, up to a maximum of 15%. Failure to provide W-2s before January 31 results in a penalty of $50 or 5% per W-2, whichever is higher.

Unemployment Benefits

Montana charges state Unemployment Benefits taxes (SUTA). The SUTA is based on a taxable wage base of $35,300 for 2021. Rates range from 0.13% to 1.6% for eligible (positive-rated) employers and 3.1% to 6.3% for deficit (negative-rated) employers. Your rating is based on your reserve ratio, which is contributions paid minus benefits paid out to ex-employees over the last three federal fiscal years. New employers pay the average contribution rate for employers in the same industry classification. You can find your exact rates in the employer handbook online.

An administrative charge of 0.18 percent of taxable salaries is also payable each quarter for experience-rated companies.

If you pay less than $1,000 in wages in a current and previous year, you do not need to pay Unemployment Benefits taxes.

If you are a student, you must pay SUTA.

• In the current or preceding calendar year, your yearly gross wage payroll equals or surpasses $1,000.
• You bought a company that is subject to SUTA.
• FUTA applies to you.
• During any quarter of the current or preceding calendar year, you hired agricultural employees and paid them $20,000 or more in cash.
• During the current or preceding calendar year, you employed 10 or more people in agricultural labor in 20 different weeks.
• In any quarter of the current or previous calendar year, you hired domestic employees and paid $1,000 or more in cash for domestic services.

Did you know? If you pay your SUTA taxes on time and in full, you may be eligible for a 5.4 percent reduction on your FUTA taxes. FUTA is 6% of the first $7,000 of each employee’s compensation, therefore you may get a 0.6 percent discount.

Insurance for Workers’ Compensation

Montana requires you to carry Insurance for Workers’ Compensation if you have even one employee. Minors and aliens, legal or otherwise, count as employees. There are a few exceptions that include domestic employees, family members, sole proprietors, and certain people working for aid only.

You can purchase Insurance for Workers’ Compensation from a private agency, through the Montana State Fund, or by self-insuring. You can apply for the state fund on its website or through one of its agents, which you can also find on the website. Self-insuring requires setting aside money to cover claims and may not be the best choice for small businesses.

Montana’s Minimum Wage Laws

The minimum wage in Montana is $8.75 per hour. It excludes tip credit, meal credits, and training pay. The amount may fluctuate every September 30, but it can’t be less than the current state minimum or the federally required minimum ($7.25 an hour)—tipped workers can’t be paid less.

The Montana Department of Labor & Industry calculates the next minimum wage each August to adjust for cost of living increases as applicable and rounds the amount to the nearest five cents.

Businesses with gross annual sales of less than $110,000 per year that are not protected by the Fair Labor Standards Act may pay $4.00 per hour. Only select Farmworkers are exempt. For further information, see Montana Code 39-3-404.

Overtime Regulations in Montana

Employees who work more than 40 hours in a week must be paid at least 1.5 times their hourly rate. There are a few exceptions:

• Farmworkers
• Students who get board or lodging in amusement or recreational sites that operate on a seasonal basis. After that, their workweek might be as long as 48 hours before overtime kicks in.
• Firefighters and police enforcement officers are subject to the Fair Labor Standards Act’s regulations.

Employees Can Be Paid in a Variety of Ways

Montana has no restrictions on how you pay your workers as long as it is in legal US currency that they may get in full. Employees cannot be compelled to accept electronic payment, so if you offer direct deposit, you should also offer a physical check or cash as an alternative. Payroll cards are also an alternative; however, they should not be used exclusively.

Use one of our suggested methods to produce a free payroll check if you need to pay workers for free.

Pay Stub Regulations

Each payday, employers must provide workers with an itemized account of salaries and deductions. Basic information about the person, such as their name and work description, should be included. You should also provide their hourly pay rates, gross pay, total taxes and deductions deducted, and final net pay amount.

Minimum Pay Period

Unless an employee is late in handing in a timesheet, employees must be paid within 10 days after the end of the pay month. If this is the case, the company may pay the employee the earnings on the next paycheck.

Montana payroll law does not set a Minimum Pay Period but says unless otherwise agreed upon, it should be semimonthly.

Payroll Deduction Regulations

Taxes and legally mandatory garnishments may be deducted from employee paychecks by employers. You may also deduct for the employee’s board, housing, and other incidentals of benefit, but they must be documented in writing. However, you can’t deduct an employee’s pay for the following reasons:

• Money shortages
• Property that has been stolen, lost or destroyed
• Employee-to-employer alleged indebtedness

Employers are not prohibited by Montana law from forcing employees to buy uniforms, tools, or other goods necessary for their jobs.

Laws Regarding Final Paychecks

Final paychecks must be received by the next payday or within 15 days after separation, whichever comes sooner. Employees have the option of requesting a check instead of another form of payment.

Unless the company has a previously agreed-upon written policy, overdue wages are due and payable immediately if an employee is dismissed or laid off. The maximum duration is thereafter 15 days or until payday, whichever comes first. The complete amount owing should be paid out in final paychecks. You are not obligated by law to pay severance or compensate for unused paid sick leave or paid vacation time.

If the employee agrees in writing or the employer files a police complaint within seven business days after the separation, the employer may withhold the last salary to repay expenditures related to the employee’s theft of property or monies. For further information, see Montana Code 39-3-205.

HR Laws in Montana That Affect Payroll

Montana’s human resources regulations are mostly based on federal norms. Because there are no competing regulations, compliance is simple.

New Hire Reporting in Montana

Within 20 days after the first day of employment, you must report new recruits to the Department of Health and Human Services. You’ll need the employee’s legal name, date of hiring, Social Security number, as well as his or her postal and home addresses. If you have an ePass account, you can accomplish this online. You may also fill out the New Hire form and submit it to the following address:

New Hire Reporting in Montana P.O. Box 8013 Helena, MT 59604-8013

Requirements for Lunch and Other Breaks

There are no laws in Montana that require lunch or other rest periods. However, if a break is given, it is considered compensated time. It is not considered paid time if a meal lasts more than 30 minutes and the employee is entirely freed of duties.

Minors in the Workforce

A minor in Montana is defined as someone under the age of 18 who does not have a high school diploma or GED, or who is 16 years old and enrolled in a recognized state or federal apprenticeship program.

Montana, like the federal government, prohibits children from working in dangerous occupations. Minors aged 14 and 15 are subject to further limitations, with certain exceptions if they have a 4-H certificate for particular equipment. Manufacturing, processing, warehousing, communications, and construction are all restricted vocations.

Minors aged 14 and 15 are not permitted to work:

• During school hours, except when public education is offered
• Except during the school year, when they may work until 9 p.m., they must work between 7 p.m. and 7 a.m.
• On school days, more than three hours
• A school week might last up to 18 hours.
• On a non-school day, more than eight hours
• In a non-school week, you’ll work more than 40 hours.

In addition, children are paid the same minimum wage as adults.

The following are excluded from child labor laws:

• Minors who work on a part-time basis on lawns and other residential or domestic tasks
• Working in the family company as a minor (except for manufacturing, mining, and hazardous occupations)
• Farm employment on the family farm or a farm where the parent or guardian is working with the approval of the parents
• The distribution of newspapers
• Volunteering
• Actors, models, and entertainers who are children
• Legislative assistance
• Nonprofit sporting organizations’ officials or referees
• Apprentices or student learners

Time Off Regulations

There are no rules governing paid time off in Montana. Unlike in some other states, no time off is necessary for voting leave or jury service. However, you must adhere to federal legislation governing family and sick leave. You also can’t impose a “use it or lose it” policy if you do give paid time off via a PTO program. You may specify a maximum amount that can be accumulated before additional can be earned until the current amount is depleted.

Family and Medical Leave in the Federal Government

There is no state family and medical leave program, but you may be required to comply with the Family and Medical Leave in the Federal Government Act (FMLA). It requires certain employers with at least 50 employees for a minimum of 20 weeks during the current or prior year to provide up to 12 weeks of unpaid time off to eligible employees who are:

• A new child is born, adopted, or fostered.
• Taking care of a sick relative
• Managing military responsibilities

Jury Duty Time Off

You are not obligated to provide paid time off for jury service. You cannot, however, discriminate against or fire an employee who has been asked to attend.

Forms for Payroll

MW-4 Montana State Form

MW-4: For state tax withholdings, Montana has its own W-4 form. It must be completed by the following individuals:

• Employees that are new
• Current workers who have not yet completed one may utilize the information on their federal W-4 unless they need to make adjustments, in which case they must also complete the MW-4.
• Employees who utilized Form MT-R, MSR, or a Native American Request for Exemption in the past. (This was required for the 2019 tax year and should have been completed by now.)

Other Payroll and Tax Forms in Montana

Other Montana state forms that pertain to businesses, including credit and exemption requests, may be found in the Montana DOR forms library under Business. The Montana Department of Labor and Industry has SUTA forms.

Federal Forms for Payroll

• W-4 Form: Used by businesses to figure out how much tax to withhold from employees’ paychecks.
• W-2 Form: This form is used to report total yearly earnings (one per employee)
• W-3 Form: Reports all workers’ total pay and taxes.
• Form 940: This form is used to report and compute the amount of unemployment taxes owed to the IRS.
• Form 941: Quarterly income and FICA taxes deducted from paychecks are reported on Form 941.
• Form 944: Annual income and FICA taxes deducted from paychecks are reported on.
• 1099 forms: Non-employee pay information is included on 1099 forms to assist the IRS in collecting taxes on contract labor.

Conclusion

While Montana’s labor and pay laws are less stringent, it nonetheless has explicit requirements and consequences for violation. It imposes a state income tax, as well as SUTA and workers’ compensation regulations. From the moment you recruit an employee until the final payment, it’s critical that you understand and follow the payroll regulations.

Frequently Asked Questions

What payroll taxes do employers pay in Montana?

In Montana, employees are not required to pay any payroll taxes, as it is a state without an income tax. The employer pays the full amount of FICA and Medicare directly out of their paycheck.

Does Montana have payroll taxes?

Yes, Montana has payroll taxes.