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Date: December 5, 2011

Bulletin Number: 1115

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Subject

Claiming Exempt from Federal, State and/or Local Tax Withholding in 2012.

Purpose

To inform agencies of the processing requirements for employees who claim exempt from Federal, State and/or Local tax withholding in 2012.

Affected Employees

Employees who are currently claiming exempt from Federal, State and/or Local tax withholdings in 2011 and employees who submit withholding allowance certificates claiming exempt in 2012.

Effective Date(s)

Thursday, February 16, 2012

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 2011 must file a new Form W-4 by February 16, 2012 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) to be filed annually by 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 currently claim exempt from Federal, State and/or Local tax withholding for calendar year 2011.

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 a valid effective date for 2012.
  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 23 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 regarding this bulletin may be e-mailed to the Tax and Compliance mailbox.