Federal Income Tax / Form W-4
All new employees should complete and
submit a [IRS]
Employee’s Withholding Allowance Certificate
to establish the appropriate federal income tax withholding from his paycheck.
At any time after the initial W-4 setup, an SMU employee can update his W-4
online via Self-Service in
access.smu.edu to change his federal income tax withholding.
The form includes the tax marital status
(Box 3) and the number of allowances claimed (Box 5) that correspond with the
IRS tax tables to determine the tax withholding. An employee may request an
additional dollar amount to be withheld (Box 6). Income tax withholding must be
based on the claimed marital status and withholding allowances. An employee may
base his withholding amount solely on a fixed dollar or percentage.
If a new employee does not provide a
completed Form W-4, income tax is withheld based on the IRS default of
Claiming “exempt” from federal income tax
An employee may claim “exempt” from federal
tax withholding on his or her Form W-4. (Refer to the IRS guidelines at the top
of Form W-4 about the conditions under which an employee may be exempt from
federal income tax withholding.)
The employee’s claim to be exempt from
federal income tax withholding is only effective for the calendar year in which
the exemption is claimed, and will automatically expire on February 15 of the
following year unless the employee submits a new Form W-4 claiming to be exempt
from federal income tax withholding for the next calendar year.
Medicare and OASDI Taxes (a.k.a. “FICA”)
The Federal Insurance Contributions Act (“FICA”) is
supported by OASDI (“social security”) and Medicare taxes. These are commonly
referred to as one tax (FICA) – but they have different tax rates and only the
OASDI tax has a wage base limit that is adjusted annually. (The 2013 limit is $
There are no withholding allowances for OASDI and Medicare
taxes. As of 01/01/13, the employee tax rate for OASDI returned to 6.2%
of wages up to the wage base limit; for Medicare, the tax rate of 1.45% is
applied to all covered wages.
New for 2013: Additional Medicare Tax
Under the Patient Protection and Affordable Care Act), the
Medicare tax rate will increase 0.9% (for employee withholding only) – from
1.45% to 2.35% – on wages paid over $200,000, effective for taxable years
after December 31, 2012.
The statute requires an employer to withhold additional
Medicare tax on wages or compensation it pays to an employee in excess of
$200,000 in a calendar year, regardless of whether the employee will actually
reach the applicable threshold. Any discrepancies between the amount withheld
and the amount of the employee's actual liability for the additional Medicare
tax will be reconciled on the individual's income tax return (Form 1040).
FICA Tax Exemptions
There are three provisions for tax exemption under FICA
that may apply to SMU employees:
- Student FICA exemption
- Minister’s FICA exemption
- Nonresident Alien FICA exemption