Summary of Tax Related Changes for 2020
The purpose of this bulletin is to inform agencies of the updated IRS tax withholding requirements for 2020 and other tax related topics.
Employees meeting the criteria as explained in this bulletin are affected.
Summary of Changes
To date, the IRS has issued guidance on changes to the following areas for 2020:
- Withholding Rates and Tax Brackets
- Additional Withholding Adjustment for Nonresident Aliens
- Supplemental Wage Withholding Flat Rate
- Social Security Wage Base Limit
- Contribution Limits on Pension/Retirement Plans
- Qualified Transportation & Parking Fringe Benefits Limit
- Mileage Rates
Individual Taxpayer Identification Number (ITIN) - Renewal/Expiration
Federal Tax Withholding Rates
All Federal tax withholding rate changes were effective in the first paycheck of January, 2020.
Federal Withholding Allowance
Per IRS Publication 15-T, withholding for employees with the 2019 version of Form W-4 or earlier will be calculated using $4,200 for each allowance. New employees, rehires, and employees changing their withholding must use the new Form W-4, which does not use allowances. Please refer to Bulletin No. 1800 for further guidance.
NY Tax Withholding Rates
The 2020 New York State and Yonkers withholding tax tables have been updated. There were no updates required for New York City at the time of this bulletin issuance.
New York State, New York City and Yonkers Withholding Allowance
The value of one New York State, New York City, and Yonkers withholding allowance remains at $1,000.
Additional Withholding Adjustment for Nonresident Aliens
The withholding of federal income tax on the wages of nonresident alien employees is subject to an additional withholding amount that is added to nonresident alien employees’ wages for calculating Federal income tax. The additional withholding amount added to annual income has increased to $8,100 for 2020 if the NRA employee was first paid wages before 2020 and has not submitted a new Form W-4 for 2020 or later. If the NRA employee was first paid wages in 2020 or later or has submitted a new Form W-4 for 2020 or later, then the additional withholding amount added to annual income is $12,400. This procedure does not apply to nonresident alien students from India.
Supplemental Wage Withholding
OSC uses the Aggregate method for Supplement Wage Withholding. (This is provided for informational purposes only.)
Social Security & Medicare Wage Base and Tax Rate Information
The Social Security wage base limit for 2020 has increased to $137,700 (max tax $8,537.40). There is no limit on the amount of wages subject to Medicare tax. The Social Security tax rate of 6.2% and Medicare tax rate of 1.45% remain the same. Employees receiving income in excess of $200,000 will be subject to an additional Medicare Tax of .9%. The additional tax applies only to income above the $200,000 threshold and is only paid by employees.
Contribution Limits on Pension/Retirement Plans
Qualified Parking Benefits
The maximum exclusion from gross income for qualified parking benefits has increased to $270 per month in 2020.
Qualified Transit Pass
The maximum exclusion from gross income for qualified transportation benefits has increased to $270 per month in 2020.
The standard mileage rate for computing the value of personal use of an employer provided vehicle is 57.5 cents per mile in 2020.
Unused ITINs – ITINs not used on a federal income tax return in the last three years (covering 2016, 2017 or 2018) will no longer be valid to use on a tax return as of January 1, 2020. ITIN holders in this group who need to file a tax return in 2020 will need to renew their ITINs. The renewal period began October 1, 2019.
Expired ITINs – ITINs with the middle digits of 83, 84, 85, 86, 87 (Example: 9XX-83-XXXX) expired at the end of 2019. The renewal period for these ITINs began October 1, 2019. ITINs with the middle digits of 70-82 can be renewed at any time by submitting a completed IRS Form W-7. The IRS will mail letters to this group to inform them of the need to renew their ITINs if they need to file a tax return and explain steps they need to take.
OSC has updated PayServ with the new IRS and NY tax requirements for 2020. OSC continues to use the Percentage Method on an Annual payroll period for income tax withholding purposes (for informational purposes only).
This bulletin is informational. Agencies must inform employees.
Questions regarding this bulletin may be directed to the Tax and Compliance mailbox.