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Date:December 22, 2005
Bulletin Number:613
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Subject

Summary of Tax-Related Changes for 2006

Purpose
To advise agencies of tax-related changes for 2006.
Affected Employees
Employees meeting the criteria as explained in this bulletin.
Effective Date(s)

New rates will be reflected in Institution paychecks dated January 5, 2006 and Administration paychecks dated January 11, 2006.

Background

For 2006, 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
  • Qualified Parking Benefits
Tax Rates

There are changes to the Federal tax withholding rates, New York State tax withholding rates, and City of New York and City of Yonkers resident tax withholding rates.

To obtain a copy of Publication 15, Circular E, Employer’s Tax Guide, contact the Internal Revenue Service toll-free at 1-800-829-3676 or visit their Web site at www.irs.gov  and select Forms and Publications to view Publication 15.

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. To obtain a copy of this publication, visit the NYS Department of Taxation and Finance Web site at www.tax.ny.gov and select Publications and Technical Bulletins>Tax Type>Withholding>NYS-50-T.

 

Personal Exemptions (Federal)

For 2006, the amount for each exemption will increase to $3,300.

 

Social Security and Medicare Taxes

The Social Security tax for 2006 will be calculated at 6.2% on the first $94,200 of taxable wages resulting in a maximum Social Security tax deduction of $5,840.40.  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 with one qualifying child whose wages are less than $32,001 ($34,001 if married filing jointly) and employees with two or more qualifying children whose wages are less than $36,348 ($38,348 if married filing jointly) may be eligible for the advance payment of Earned Income Credit (EIC).
 
The maximum advance Earned Income Credit that may be given to an employee with their paycheck is $1,648 throughout the calendar year.  The Earned Income Credit is not available to employees who have certain investment income of more than $2,800 in 2006. The new tables for calculating the credits are included in 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 No. 596 for specific instructions regarding EIC payments.

Qualified Parking Benefits

The maximum amount allowed as exclusion from gross income for qualified parking benefits will be $205 a month in 2006, an increase from $200 a month in 2005.

Refer to Payroll Bulletin No. 573 for additional information and specific instructions.

Questions

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