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Date: December 23, 2010

Bulletin Number: 1046

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Subject

Claiming Exempt from Federal, State and/or Local Tax Withholdings for tax year 2011.

Purpose

To inform agencies of the instructions for Claiming Exempt from Federal, State and/or Local Tax Withholdings for tax year 2011.

Affected Employees

Employees who claimed exempt from Federal, State and/or Local tax withholdings for tax year 2010 or would like to claim exempt for the upcoming 2011 tax year.

Background According to IRS Publication 505, (Tax Withholding and Estimated Tax) and IRS Instructions for Form W-4 (Employees Withholding Allowance Certificate) employees who claimed exempt from Federal withholding, for tax year 2010, must file a new Form W-4 by February 16, 2011 to claim exempt for the new year. The New York State Department of Taxation and Finance requires a new form IT-2104-E (Certificate of Exemption from Withholding) annually from employees who claim exempt from New York State, New York City or Yonkers withholding.

OSC Actions OSC has created Control-D report NPAY738 (Employees Exempt from State and Federal Taxes). The report identifies employees who claimed exempt from Federal and/or State tax withholding for tax year 2010.

Agency Actions

Agencies must review the NPAY738 Control-D report and request a new Form W-4 and/or IT-2104-E from all employees appearing on the report.

If the employee does provide new forms, agencies must update the employee’s Federal, State and/or Local Tax Data pages as follows:

  1. Home>Payroll for North America>Employee Pay Data
    USA>Tax Information>Update Employee Tax Data.
  2. Select the Federal Tax Data page.
  3. Insert a new row with an effective date that indicates the
    form is for tax year 2011.
  4. Under the Special Tax Withholding Status, (on either the
    Federal or State page as appropriate) select the “Maintain
    Gross; FWT will be zero unless specified under ‘Additional
    Withholding’ below” radio button.
  5. Save the page.

Note: The above steps must also be followed to update the State
and Local Tax Data pages.

If an employee appearing on the report does not provide new Forms W-4 and/or IT-2104-E, the agency must update the employee’s Federal, State and/or Local tax Data pages as follows:

  1. Home>Payroll for North America>Employee Pay Data
    USA>Tax Information>Update Employee Tax Data.
  2. Select the Federal Tax Data page.
  3. Insert a new row with an effective date for pay period 23 for
    Administration and pay period 24 for Institution.
  4. Under the Special Tax Withholding Status, (on either the
    Federal or State page as appropriate) select the “None”
    radio button.
  5. Set the “SWT Marital/Tax Status to “S.”
  6. Withholding Allowances “0.”
  7. Save the page.

Note: To claim exempt from tax withholdings and be in compliance with IRS and NYS Rules and Regulations, the agency must populate the employee’s Tax Data page as instructed above.

Note: Employees claiming single or married with 99 allowances are not in compliance with IRS regulations.

Questions Questions may be emailed to the Tax and Compliance mailbox.