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Date: February 20, 2014

Bulletin Number: 1300

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Subject

Claiming Exempt from Federal, State and/or Local Tax Withholding in tax year 2014.

Purpose

To inform agencies of the processing requirements for employees who claim exempt from Federal, State and/or Local tax withholding in tax year 2014.

Affected Employees

Employees who claimed exempt from Federal, State and/or Local tax withholdings in 2013 and employees who submit withholding allowance certificates claiming exempt in 2014.

Effective Date(s)

Institution paycheck dated March 6, 2014.

Administration paycheck dated March 12, 2014.

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 2013, must file a new Form W-4 by February 17, 2014 to claim exempt for tax year 2014.  The new Form W-4 will be posted to the Internal Revenue Service (IRS) website as soon as it is available.

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 claimed exempt from Federal, State and/or Local tax withholding for tax year 2013.

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 2014.
  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. Inert a new row with a valid effective date for 2014.
  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, agencies must update the employee’s Tax Data page, with the 2014 information, as instructed above.

Questions

Questions regarding this bulletin may be e-mailed to the Tax and Compliance mailbox.