02-P-024 New Tables for Federal Withholding Tax for 2002
|DATE:||December 5, 2001|
|SUBJECT:||New Tables for Federal Withholding Tax for 2002|
|EFFECTIVE DATE:||January 1, 2002|
|SUMMARY:||New Federal Withholding Tax Rates Effective for Paychecks Issued On or After January 1, 2002.|
The Internal Revenue Service (IRS) has issued advance copies of the new federal percentage tables for computing the federal withholding tax deductions effective for all paychecks issued on or after January 1, 2002. In addition, the standard deduction for one withholding allowance changes to $3000.00 per year in calendar year 2002.
The attached tables have been prepared for use in computing all federal withholding tax payments for wages paid on or after January 1, 2002. When calculating federal and state withholding tax by annualizing, 26 pay periods should be used to arrive at an annualized amount.
IRS regulations require employees who claim an exempt status from federal withholding tax, for income earned in the United States, to file a new W-4 form annually. Employees who claimed an exempt status in calendar year 2001 must file a new W-4 form for calendar year 2002 if they wish to continue their exempt status.
Employees may be eligible for the withholding tax exempt status if the following criteria are met:
- The employee had no income tax liability in the previous year; and
- The employee anticipates no income tax liability in the upcoming year.
Additionally, IRS regulations require non-resident alien employees who claim an exempt status from federal withholding tax up to their treaty limit, for income earned in the United States, to file a new 8233 annually. Employees who claimed a non-resident alien exempt status in calendar year
2001 must file a new 8233 form for calendar year 2002 if they wish to continue their non-resident alien status. As a reminder, Regents Institutions are responsible for the accuracy of the eligibility of their non-resident alien employees and for monitoring maximum presence.
The Department of Administration will be updating the SHARP federal and state tax data records on December 17, 2001, for all employees currently claiming exempt from withholding; the tax data record updates will be effective January 1, 2002. On-line agencies must enter a new effective-dated row into SHARP for employees who wish to claim exempt from withholding. Paper user agencies should submit an employee data sheet to the Division of Personnel Services for employees who wish to claim exempt from withholding in 2002. The new tax data row should be effective January 2, 2002. Please refer to the Employee Payroll Tax Data section of the Payroll module in the on-line CBT (Computer-Based Training) for specific instructions on entering employee tax data information.
A new-effective dated row will also be added in the SHARP federal tax data records on December 17, 2001 for employees with a special tax withholding status of 'Non-Resident Alien' to reflect that no 8233 form has been submitted for calendar year 2002. The new tax data row will be dated January 1, 2002. Payroll Services will update the 8233 indicator on the tax data records once a form 8233 for calendar year 2002 has been submitted.
The Division of Accounts and Reports will provide a listing to agencies, which identifies all employees whose withholding tax status was updated on December 17, 2001. This listing will include department, employee ID, name, SSN, and withholding tax exempt status. A listing will not be provided for the 'Non-Resident Alien' updates since reports are generated periodically throughout the calendar year to identify employees who have had non-resident alien earnings reported but who do not have a current 8233 form on file in Payroll Services.
The Department of Administration will make all of the necessary changes in the computation of withholding taxes for SHARP agencies. Regents' institutions are responsible for implementing the new withholding tax rates in their respective payroll systems.