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Date: December 17, 2004 Bulletin Number: 528
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Subject

Summary of Tax-Related Changes for 2005

Purpose
To advise Agencies of tax-related changes for 2005
Affected Employees
Employees meeting the criteria as explained in this bulletin.
Effective Date(s)
New rates will be reflected in Institution checks dated January 6, 2005 and Administration checks dated January 12, 2005.

Background

For 2005, changes have been made to:

  • Federal Income Tax Withholding Rates
  • Social Security/Medicare Taxes
  • Federal Earned Income Tax Credits
  • New York State, City of New York and City of Yonkers Resident Income Tax Withholding Rates

Tax Rates

There are changes to the Federal Withholding Tax Rates, New York State Withholding Tax Rates, City of New York and City of Yonkers Resident Taxes.

To request a copy of Publication 15, Circular E, Employer’s Tax Guide, contact the IRS at the toll-free number 1-800-829-3676 or visit their website at www.irs.ustreas.gov to view this publication.

The New York State, City of New York, and City of Yonkers Resident Income Tax Withholding Rate changes can be found in Publication NYS-50-T.1. To obtain a copy of this publication, visit the NYS Department of Taxation and Finance website at www.tax.ny.gov and select Publications and Technical Bulletins>Tax Type>Withholding>NYS-50-T.1.

Social Security/Medicare Taxes
The Social Security tax for 2005 will be calculated at 6.2% on the first $90,000 of taxable wages resulting in a maximum Social Security tax deduction of $5,580.00. The Medicare tax rate remains at 1.45%. There is no limit on the amount of wages subject to Medicare tax.

Federal Earned Income Tax Credits

Employees whose wages are less than $31,030 ($33,030 if married filing jointly) may be eligible for the advance payment of Earned Income Credit (EIC), with a maximum credit of $1,597. The new tables for calculating the credits are included in the IRS Publication 15, Circular E, Employer’s Tax Guide.

Eligible employees must complete a new Form W-5, Earned Income Credit Advance Payment Certificate each year. Copies of the form may be obtained from the IRS.

Refer to Payroll Bulletin 509 for specific instructions.

Questions

Questions regarding this bulletin may be directed to the Payroll Deductions mailbox.