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Date:January 3, 2008
Bulletin Number: 778
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Subject

 Fixed Amounts for Tax Withholding

Purpose

To advise agencies that the use of fixed amounts or percentages for tax withholdings that are entered into PayServ does not comply with IRS Rules and Regulations.

Affected Employees

Employees with a fixed amount or percentage of Federal, State and local withholding taxes in PayServ.

Effective Date(s)

Immediately.

Background

There are State employees whose current tax withholdings in PayServ are based on a fixed amount or percentage. Agencies have entered the fixed amounts for Federal, State or local withholding taxes into PayServ, usually based on an invalid Form W-4 and/or Form IT-2104 that has been submitted by an employee.

According to Internal Revenue Service Publication 505 (Tax Withholding and Estimated Tax), page 3:

“Form W-4 includes three types of information that your employer will use to figure your withholding.

  • Whether to withhold at the single rate or at the lower married rate.
  • How many withholding allowances you claim (each allowance reduces the amount withheld).
  • Whether you want an additional amount withheld.

Note:  You must specify a filing status and a number of withholding allowances on Form W-4.  You cannot specify only a dollar amount of withholding.”

Agency Actions

Agencies must not initiate new fixed tax transactions for employees.

For employees who have a fixed tax entry, agencies must contact the employee, request a new completed and signed W-4 or IT-2104 and any other applicable tax form, and update the employee’s Tax Data page(s) in PayServ accordingly. These records must be updated by February 1, 2008 to affect Institution paychecks dated February 14, 2008 and by February 8, 2008 to affect Administration paychecks dated February 20, 2008. 

Agencies may refer to the new Control-D report NHRPTMP14 (Employees With Fixed Taxes) to identify these employees.  This report identifies employees with a fixed tax entry on the employee’s Tax Data page.   Agencies are required to update only those employees with a status of “A” (Active), “L” (Leave) or “P” (Paid Leave).  

Note:  Agencies are reminded that new forms (W-4 and/or IT-2104) are required whenever changes are made to an employee’s tax record.

OSC Actions

OSC has created a Control-D report identifying employees who currently have a fixed amount or percentage for withholding. 

OSC will automatically update the records of employees with a status of “T” (Terminate), “R” (Retired) or “D” (Deceased) whose most recent effective dated row on the Tax Data page is a fixed tax entry to reflect a marital status of “Single” and withholding allowance of “0.”

OSC will no longer process fixed tax amounts.  If a new fixed tax entry is identified, OSC will instruct the agency to update the employee’s Tax Data page correctly.  However, if the employee’s record is not updated prior to the confirm process for that payroll cycle, OSC will update the employee’s Tax Data page to reflect a marital status of “Single’ and withholding allowance of “0.”

Questions

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