05-P-014 2005 Percentage Method Tables for Federal Tax Withholding (Supersedes 03-P-046)
|DATE:||December 10, 2004|
|SUBJECT:||2005 Percentage Method Tables for Federal Tax Withholding|
|EFFECTIVE DATE:||January 1, 2005|
|CONTACT:||Roger Basinger||(785) 296-5387||Roger.Basinger@da.state.ks.us|
|SUMMARY:||New Federal Withholding Tax Tables Effective for Paychecks Issued On or After January 1, 2005.|
The Internal Revenue Service (IRS) has issued new tables for the percentage method of withholding for 2005. The attached tables are to be used in computing federal tax withholding for wages paid on or after January 1, 2005. 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 the twenty-six pay periods in the year. In addition, the value of one withholding allowance is increased to $3,200 for 2005.
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 years, and 2) the employee anticipates no income tax liability in the upcoming year.
An e-mail notification was sent on December 1, 2004 to all SHARP employees who were exempt from federal withholding in 2004. The notification reminded employees that a new W-4 must be submitted to continue the federal tax withholding exempt status for 2005. 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.state.ks.us/servlets/iclientservlet/ess/?cmd=login. Notifications were sent to the agency e-mail address for those employees who lack an individual e-mail address, and agencies will need to distribute the notification to their employees. A list of agency employees receiving the notification was put into the Agency Payroll Workflow Administrator's work list.
SHARP employees are encouraged to use the Employee Self Service functionality to file their 2005 W-4s. As of this date, the IRS has not issued the 2005 Form W-4 - Employee's Withholding Allowance Certificate. Once the W-4 becomes available, notification will be sent to subscribers of the SHARP Infolist. SHARP users interested in subscribing to the Infolist, but who have not yet done so, can subscribe at http://www.da.ks.gov/SHARP/infolist.htm.
Employees should submit their new W-4s by December 17, 2004 to allow adequate time for processing. Agency personnel have until 6:00 p.m. on December 20, 2004 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 2005.
The KPAY320 will process in the batch cycle generated the evening of December 20, 2004. 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, 2005 effective-dated row will be placed in the employee Tax Data record, and will update the employee's marital status to 'single' and exemptions to 'zero'. (Please note the KPAY320 process will also update the existing SHARP federal tax data records for all employees claiming the advance Earned Income Credit in 2004 in which the 'New W-5 Received' radio button is not checked. The update will insert a January 1, 2005 effective dated row with an EIC Status of 'Not Applicable'.)
For any Forms W-4s for 2005 (or Forms W-5s for 2005 for employees claiming the advanced EIC) received between December 21, 2004 and January 1, 2005, agency personnel will need to enter the data with a January 2, 2005 effective date. The data will need to be entered into SHARP by 6:00 p.m. on Friday, January 7, 2005 in order to be reflected in the on-cycle paycheck dated January 14, 2005. Agency Workflow Administrators will also need to change the effective date to January 2, 2005 for any electronic Forms W-4s for 2005 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 2004 must file a new 8233 form for calendar year 2005 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 20, 2004 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 2005. The new tax data row will be dated January 1, 2005. Payroll Services will update the 8233 indicator on the tax data records once a form 8233 for calendar year 2005 has been submitted.
The KPAY320 creates a report (by SHARP agency) that identifies all agency employees whose exempt withholding status and/or EIC was updated in SHARP on the night of December 20, 2004. The report will be available in the agency directory on the MVS on Tuesday, December 21. 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 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.
Attachment: Tables for Percentage Method of Withholding