16-P-011 2016 Percentage Method Tables for Federal Tax Withholding (December 9, 2015)
Informational Circular No.:16-P-011
Supersedes Informational Circular No: 15-P-019
Effective Date: January 1, 2016
Contact Name: Nancy Ruoff
Ph: (785) 296-2853
Approval: Nancy Ruoff (Original Signature on File)
Summary: New Federal Withholding Tax Tables Effective for Paychecks Issued On or After January 1, 2016
The Internal Revenue Service (IRS) has issued new tables for the percentage method of withholding for 2016. Therefore, the attached tables will be used in SHARP for computing federal tax withholding for wages paid on or after January 1, 2016. In order to use the attached tables, income must be annualized. To annualize income, multiply federal taxable income for the current bi-weekly pay period by twenty-six pay periods. In addition, the value of one withholding allowance has increased to $4,050 for 2016.
Regents should also note that the annual amount to add to Nonresident Alien employee’s wages for calculating income tax withholding for 2016 has decreased to $2,250. In addition, Regents should check IRS Publication 1494 for any changed amounts when computing tax levies for garnishments. Publication 1494 for 2016 is currently available on the IRS website at https://www.irs.gov/pub/irs-pdf/p1494.pdf.
IRS regulations continue to require employees claiming exempt status from federal tax withholding (for income earned in the United States) to file a new W-4 form annually. Employees are eligible for the exempt status if the following criteria are met: 1) the employee had no income tax liability in the previous year, and 2) the employee anticipates no income tax liability in the upcoming year.
An e-mail notification was sent on December 1, 2015 to all SHARP employees who were exempt from federal withholding in 2015. The notification reminded employees that a new W-4 must be submitted to continue the federal tax withholding exempt status for 2016. The notification was sent to the employee’s e-mail address listed under ‘Update My Profile’ in the Employee Self Service Center at https://sharp.ks.gov/psp/ESS/?cmd=login. Agencies will need to distribute notifications to their employees who lack an individual e-mail address.
SHARP employees are encouraged to use the Employee Self Service functionality to file their 2016 W-4s. The 2016 Form W-4 has not currently been published by the IRS. The Office of the Chief Financial Officer will post it to their website as soon as it becomes available. Employees should submit their new W-4s as soon as possible to allow adequate time for processing. Agency personnel have until 6:00 p.m. on December 30, 2015 to enter all paper W-4s into the system. It is important that agency personnel check the ‘New W-4 Received’ radio button on the employee’s ‘Federal Tax Data 1’ page in SHARP for the effective-dated row that is entered. Agency Workflow Administrators also need to check the ‘New W-4 Received’ radio button on electronic W-4s submitted by the employee for calendar year 2016.
The KPAY320 will process during the batch cycle generated on the evening of December 30, 2015. This process will search for employees for whom a W-4 notification was sent. If a new W-4 has not been received, a January 1, 2016 effective-dated row will be placed in the employee’s Tax Data record, and will update the employee’s marital status to ‘single’ and exemptions to ‘zero’.
For any Form W-4s for 2016 received after December 30, 2015, agency personnel will need to enter the data with a January 2, 2016 effective date. Agency Workflow Administrators also will need to change the effective date to January 2, 2016 for any electronic FormsW-4s for 2016 received in this time period. 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 and worklist maintenance.
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
2015 must file a new 8233 form for calendar year 2016 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 KPAY320 processed on December 30, 2015, will enter a new effective dated row in the SHARP federal tax data records for employees with a special tax withholding status of ‘Non-Resident Alien’ to reflect that no 8233 form has been submitted for calendar year 2016. The new tax data row will be dated January 1, 2016. Regents Institutions are responsible for updating the 8233 indicator on the tax data records once a form 8233 for calendar year 2016 has been submitted.
The KPAY320 creates a report (by SHARP agency) that identifies all agency employees whose exempt withholding status was updated in SHARP on the night of December 30, 2015. The report will be available in the agency directory on the MVS on Friday, December 31, 2015. A report 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 whose tax data records indicate a current 8233 form has not been received.
The Office of the Chief Financial Officer, Payroll Services, 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.
Attachment: Tables for Percentage Method Withholding
Printable Version of 16-P-011