| Subject |
Withholding
Tax Calculation for Employees in Adjunct Positions |
| Purpose |
To explain
the methodology that is used to calculate withholding taxes for adjunct
employees. |
|
Affected Employees |
Employees
appointed to adjunct positions. |
| Background |
The methodology for calculating withholding
taxes for all State employees, including adjunct employees in the State and City
Universities, was changed when New York State converted to a new payroll system
in 1998. To avoid potential under withholding of taxes, the Office of the State
Comptroller (prior to conversion) notified state agencies of the changes in the
tax withholding methodology; each agency was responsible for notifying employees
that they had the option of adjusting their withholding allowances to ensure
that the proper amount of taxes was being withheld. Since the conversion, there
have been many inquiries from adjunct employees about the impact of this
methodology on their paychecks. As a result, OSC is re-issuing and clarifying
the explanation provided to state agencies regarding the tax withholding
calculation methodology
Prior to conversion to the new payroll system, the bi-weekly tax rate
methodology was used to calculate withholding taxes. This methodology calculates
withholding taxes based on earnings in each paycheck, without regard to the
contract period or the total amount earned over the contract period. The
bi-weekly methodology assumes that the same bi-weekly amount will be earned for
an entire year.
The annualized tax rate methodology replaced the bi-weekly methodology
upon conversion to the new payroll system. Unlike the bi-weekly methodology, the
annualized methodology does not assume that the same amount will be earned for
an entire year. The annualized methodology calculates withholding taxes for
adjunct employees based upon total contract earnings and the number of payroll
periods within the contract period.
Both the bi-weekly and annualized tax rate methodologies comply with Federal,
State and Local regulations. However, the annualized methodology will generally
result in lower tax withholding amounts. In certain cases, this methodology will
result in no taxes being withheld. To ensure that the proper amounts of taxes
are being withheld, agencies should encourage adjunct employees to consider the
following action steps:
1. Review their tax withholding status with a professional
2. Review their paycheck stub each
payday, check the amount of taxes withheld and adjust the tax withholding
allowances and/or marital status, as appropriate
3. Determine whether withholding
additional taxes is necessary
4. Reconsider their withholding status
if contract dates and amounts change
|
| Tax
Withholding Methodology
|
The Annual Tax Rate Schedule is used for
all tax calculations. Taxes are calculated on the amount of contract pay using
the tax marital status of single or married and the number of withholding
exemption allowances. This amount is then divided by the number of contract
periods, and any additional withholding amount reported is then added.
|
Federal
Tax:
2001
|
The Federal tax for 2001 is calculated by
subtracting the number of exemptions multiplied by $2,900 (the annual amount per
allowance) from the contract pay.
|
| New
York State Tax: 2001
|
The New York State tax is calculated by
subtracting the annual deduction allowance of $6,975 for single, or $7,475 for
married, from the contract pay amount; then subtract the number of exemptions
multiplied by $1,000.
|
New
York
City Resident Tax: 2001
|
The New York City Resident Tax is
calculated by subtracting the annual deduction allowance of $5,000 for single,
or $5,500 for married, from the contract pay amount; then subtract the number of
exemptions multiplied by $1,000.
|
| Yonkers
Resident Tax: 2001
|
The Yonkers Resident Tax is calculated by
subtracting the annual deduction allowance of $6,975 for single, or $7,475 for
married, from the contract pay amount; then subtract the number of exemptions
multiplied by $1,000. Multiply the results by .05 then divide that amount by the
number of contract periods.
|
Yonkers
Non-Resident
Tax: 2001
|
The Yonkers Non-Resident Tax is calculated
by subtracting the annualized pay exclusion amount from the contract pay, if
applicable. Multiply the results by .0025; then divide that amount by the number
of contract periods.
|
| Examples
|
Examples of the tax calculation methodology
are attached to provide further clarification.
|
| Agency
Actions
|
Notify adjunct employees of tax withholding
calculation methodology. A letter is attached that Payroll Officers could use
to inform adjunct employees about the tax withholding methodology.
|
| Questions
|
Questions regarding this bulletin may be directed to the University Manager of Payroll Systems and Operations at CUNY Central Office. |
|
|
