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Michigan Department of Treasury - City Tax Administration
5469 (Rev. 11-19)
2020 City of Detroit Income Tax Withholding Guide
Who Must Withhold? rendered or work performed regardless of whether such
services or work are performed in or out of the city; and
Every employer that has a location in the City of Detroit, or is • All compensation of a nonresident for services rendered or
doing business in the City of Detroit, even if it has no location work performed in the City of Detroit where the City of Detroit
in the City of Detroit, is required to withhold income tax from is the predominant place of employment.
its employees. An employer is any individual, partnership,
association, corporation, non-profit organization, governmental Vacation, holiday, sick, severance and bonus pay to
body or unit or agency, or any other entity that employs one or nonresidents who perform part but not all of their work or
more persons on a salary, bonus, wage, commission or other services in the City of Detroit are taxable in the same ratio as
basis whether or not the employer is a business. their normal activities.
For example: Example: A nonresident employee who is subject to
○ A construction firm from Ohio doing work in the City withholding on 60% of their earnings, because 60% of their
of Detroit is required to withhold income tax from its work is performed in the City of Detroit, is also subject to
employees. withholding on 60% of their vacation, holiday, sick pay,
○ An employer that has locations both in and out of severance pay, bonus pay or wage payments during periods of
the City of Detroit must withhold income tax from all sickness.
employees working in the City of Detroit, and from all
City of Detroit resident employees working in or out of the Payments Not Subject to Withholding
City of Detroit. Withholding does not apply to:
○ A non-profit organization in the City of Detroit is • Wages paid to domestic help;
required to withhold income tax from its employees
• Fees paid to independent contractors who are not employees;
(although it is not engaging in business activity in the
• Payment to a nonresident employee for work or services
usual sense).
performed in the City of Detroit, if the predominant place of
○ Employers that are not required to withhold City of
employment is not the City of Detroit;
Detroit income tax may register and withhold for the
convenience of their City of Detroit resident employees. • Payment to a nonresident employee for work or services
Convenience withholders must comply with the rendered outside the City of Detroit;
registration and filing requirements outlined in these • Pensions and annuities, worker’s compensation and similar
instructions. benefits;
• Amounts paid for sickness, personal injury or disability
NOTE: Employers withholding City income tax are required
(so called excludable sick pay) to the same extent that these
to file the City of Detroit Income Tax Withholding Monthly/
amounts are exempt from federal income tax, but the employer
Quarterly Return (Form 5323) either monthly ($1,200 or more
must withhold from such payments if federal tax is withheld;
withheld per year) or quarterly ($1,199 or less withheld per
• Amounts paid to an employee as reimbursement for
year) AND the City of Detroit Income Tax Withholding Annual
expenses incurred in performing services.
Reconciliation (Form 5321).
An individual with income described in the first three bullets
Employees Who are Subject to Withholding above is not subject to withholding on such income. The
An employer either required to withhold or voluntarily individual is nevertheless required to file an annual return and
registered for withholding must withhold on compensation paid report such income if the individual is a City of Detroit resident,
to the following employees: or is a nonresident earning such income in the City of Detroit.
• All residents of the City of Detroit whether or not they work Employee’s Withholding Exemption Certification
inside the City of Detroit; and for the City of Detroit (DW-4), Form 5527
• All nonresidents of the City of Detroit who have the City of
To determine each employee’s place of residence and
Detroit as their predominant place of employment (see below).
predominant place of employment, an employer must have
An employee is anyone from whom an employer withholds each employee fill out an Employee’s Withholding Exemption
either federal income tax or social security tax. Certificate for the City of Detroit (DW-4), Form 5527. Only
one Form 5527 is required for each employee, even though the
Compensation Subject to Withholding employee may be subject to withholding for two cities.
City of Detroit income tax must be withheld from: When properly filled out, Form 5527 provides the employee’s
• All compensation (salaries, wages, commissions, severance city of residence and the two cities or communities in which
pay, bonuses, etc.) of a City of Detroit resident for services the employee earns the greatest percentage of compensation
These instructions are interpretations of the Detroit Income Tax Ordinance. The Detroit Income Tax Ordinance will prevail in
any disagreements between the instructions and the Detroit Income Tax Ordinance.
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