State Agencies Bulletin No. 1813

Subject
Claiming Exempt From Federal, State and/or Local Tax Withholding in Tax Year 2020
Date Issued
February 3, 2020

Purpose

The purpose of this bulletin is to inform agencies of the processing requirements for employees who claim exempt from Federal, State and/or Local tax withholding in tax year 2020.

Affected Employees

Employees who claimed exempt from Federal, State and/or Local tax withholding in 2019 and employees who submit withholding certificates claiming exempt in 2020 are affected.

Effective Date(s)

Effective as of Administration paycheck dated March 4, 2020 and Institution paycheck dated March 12, 2020.

Background

According to IRS Publication 505 (Tax Withholding and Estimated Tax) and IRS Instructions for Form W-4 (Employees Withholding Certificate), employees who claimed exempt from Federal withholding for tax year 2019, must file a new Form W-4 by February 18, 2020 to claim exemption for tax year 2020. The new 2020 Form W-4 is now available on the Internal Revenue Service (IRS) website.

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.

Agency Actions

The following Control-D report is available for agency use:

NPAY738 - Employees Exempt from State and Federal Taxes

This report identifies employees who claimed exempt from Federal, State and/or Local tax withholding for tax year 2019.

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. Main Menu>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 2020.
  4. Federal Form W-4 Version should be set to “2020 or Later”.
  5. Under the Special Withholding Tax Status select “Maintain taxable gross”.
  6. All other fields should be “0” or blank (see screen shot below).
  7. Save the page.
  8. Navigate to the State and Local Tax Data pages with the same effective date as above and update the Special Withholding Tax Status to “Maintain taxable gross”.
Image of Tax Data updates for employees who submit new forms

If an employee appearing on the report does not provide a new Form W-4, begin withholding as if he or she had checked the box for Single or Married filing separately in Step 1 (c) and made no entries in Step 2, Step 3, or Step 4 of the 2020 Form W-4. The agency must update the employee’s Federal Tax Data page as follows:

  1. Main Menu>Payroll for North America>Employee Pay Data USA>Tax Information>Update Employee Tax Data. Select the Federal Tax Data page.
  2. Insert a new row with a valid effective date for 2020.
  3. Federal Form W-4 Version should be set to “2020 or Later”.
  4. Under the Special Withholding Tax Status, select “None.”
  5. Set the Tax Status to “Single.”
  6. All other subsequent fields should be “0” or blank (see screen shot below)
  7. Save the page
Image of Tax Data updates for employees without new Form W-4

If the employee has also not submitted a new IT 2104-E, update the employee’s State and Local Tax Data pages as follows:

  1. Navigate to the State Tax Data page with the same effective date as above.
  2. Under the Special Withholding Tax Status, select “None”
  3. Set the Tax Marital Status to “Single”
  4. All other subsequent fields should be set to “0” (see screen shot below).
  5. These same selections should be made to the Local Tax Data page, if applicable.
  6. Save page.
Image of Tax Data updates for employees without new IT 2104-E

Questions

Questions regarding this bulletin may be emailed to the Tax and Compliance mailbox.