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Iowa Payroll Tax and Labor Laws

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Did you know that Iowa has a reciprocal withholding agreement with Illinois that allows income tax withholding for the employee's state of residence only?

Iowa Wage and Hour Laws

Employees covered by Iowa's minimum wage law must be paid at least $7.25 an hour.

All employees are covered except for:

  • those exempt from coverage by the Fair Labor Standards Act;
  • outside salespersons;
  • employees of retail or service establishments if more than 50 percent of the annual dollar volume of sales is made within the state and 75 percent of the annual dollar volume of sales is not for resale;
  • retail or service establishments with annual gross income less than 60 percent of the FLSA limit;
  • certain maritime employees; and
  • certain agricultural employees.

Iowa Payroll for Employers

Employers covered by Iowa's wage payment law must pay wages at least once in a calendar month, semimonthly or biweekly. Payments must be made not more than 12 days following the close of a pay period, excluding Sundays and legal holidays.

All employees are covered, except those specifically exempt by statute; among those exempt are certain agricultural employees.

Iowa Unemployment:

Taxable Wage Base ($000s):                        32,400

New Employer Rate (% Taxable Wages)    1.0 or 7.5

Employee Tax Rate (% Taxable Wages)     None

Iowa Income Tax Withholding

Iowa requires employers to withhold state income tax from employees' wages and remit the amounts withheld to the Department of Revenue.

Every employer that has an office or does business in Iowa and that is required to withhold federal income tax on any compensation paid in the state must withhold Iowa individual income tax from that compensation. Responsibility for collecting and remitting the tax rests with the employer or withholding agent.

Agricultural employers must withhold Iowa tax from wages if federal income tax must be withheld.

Iowa and Illinois have a reciprocal withholding agreement, with that, provides for withholding from wages for the employee's state of residence only.

Iowa Benefits

Iowa Voting Rights:

Employer Right to Schedule Voting Hours         Yes

Pay Deduction for Voting Time Leave                 Time Off with Pay Limited to 2 Hours

Iowa requires employers to allow employees sufficient leave time to vote.

This summary is restricted to coverage of private employers. Employers must grant enough voting time leave — not to exceed three hours — to give employees three consecutive hours to vote. Employers can designate the time to be taken.

Iowa State Tax Resources

SurePayroll, Inc. and its subsidiaries assume no liability and make no warranties on or for the information contained on these state payroll pages. The information presented is intended for reference only and is neither tax nor legal advice. Consult a professional tax, legal or other advisor to verify this information and determine if and/or how it may apply to your particular situation.

This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.
Accurate as of December 2020