21-P-011 2021 Percentage Method Tables for Federal Tax Withholding (December 17, 2020)

The Internal Revenue Service (IRS) has issued new tables for the percentage method of withholding for 2021 per Publication 15-T including an Employer’s Worksheet to be used for computing federal tax withholding for wages paid on or after January 1, 2021.  To use the attached IRS worksheet and 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 remained at $4,300 for employees whose Form W-4 is from 2019 or earlier. 

For employees whose Form W-4 is from 2020 or later, Step 2 on the Form W-4 determines which set of attached tables are used to compute federal tax withholding.  The first set of tax tables (page 2, left side of the attachment) is used for employees with a 2019 or earlier Form W-4 or whose 2020 Form W-4 does not have the box in Step 2(c) checked.  The second set of tax tables (page 2, right side of the attachment) is used for employees whose 2020 Form W-4 does have the box in Step 2(c) checked.

Regents should also note that the annual amount to add to Nonresident Alien employee’s wages for calculating income tax withholding for 2021 has increased to $8,250 if the NRA employee has not submitted a Form W-4 for 2020 or later or $12,550 if the NRA employee has submitted a Form W-4 for 2020 or later or was first paid wages in 2020 or later.  In addition, Regents should check IRS Publication 1494 for any changes to the amounts used when computing tax levies for garnishments. Publication 1494 for 2021 is currently available on the IRS website at https://www.irs.gov/pub/irs-pdf/p1494.pdf.  Regents should be aware that the withholding on supplemental wages rate remains at 22% for 2021.

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.   

SHARP employees are encouraged to use the Employee Self Service functionality beginning January 1, 2021 to file their 2021 W-4s.  The 2021 Form W-4 has been published by the IRS and can be found on the Office of Accounts and Reports website at https://admin.ks.gov.production.premier.siteviz.com/for-state-agencies/agency-information-center/document-center.  

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

2020 must file a new 8233 form for calendar year 2021 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 Office of Accounts and Reports, Statewide Payroll, will make 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.  

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Attachment:  IRS Publication 15-T (2021)

Worksheet 1. Employer’s Withholding Worksheet for Percentage Method Tables for Automated Payroll Systems and 2021 Annual Percentage Method Tables

Printable Version of 21-P-011