Federal Income Tax Withholding
The basis for withholding federal income tax is determined by the information supplied by the employee to SDSU Research Foundation on IRS Form W-4, (PDF Format, 100 KB)* Employee’s Withholding Allowance Certificate, and IRS Form W-5, (PDF Format, 120 KB)* Earned Income Credit Advance Payment Certificate. Neither one of these forms may be submitted by employees for a retroactive period. The effective date of each form is for an entire pay period based upon SDSU Research Foundation payroll deadlines.
- Withholding Allowances
IRS Form W-4 (PDF Format, 100 KB)* is used to claim the allowance(s) for self and spouse, dependents, blindness, ages, etc., which exempt portions or all of gross salary of an employee from both federal and state income tax withholding. The W-4 (PDF Format, 100 KB)* is completed by each employee when hired and may be resubmitted at any time to change the number of allowances claimed. The W-4 (PDF Format, 100 KB)* may also be used to request additional federal and state income tax withholding over and above the normal deduction or to report exempt status for state income tax withholding purposes. If an employee does not complete a Form W-4, (PDF Format, 100 KB)* federal and state income taxes will be withheld from the employee’s salary at the single rate with zero allowances.
When requested by the IRS, Form W-4 (PDF Format, 100 KB)* must be made available for inspection by an IRS employee. The IRS may also request copies of Forms W-4 (PDF Format, 100 KB)* for one or more named employees. If the IRS later provides notice in writing that an employee(s) is not entitled to claim exemption from withholding or a claimed number of withholding allowances, federal income tax withholding will be based on the effective date and maximum number of withholding allowances specified in the notice or lock-in letter. Variance from this lock-in letter will be in accordance with regulations outlined in IRS Publication 15, Employer’s Tax Guide. (PDF Format, 1.74 MB)*
- No-Tax-Liability Exemption from Withholding
An eligible employee may exclude his or her entire gross salary from federal and state income tax withholding by completing a Form W-4 (PDF Format, 100 KB)* certifying that he or she had no income tax liability for the preceding year and anticipates none for the current year. This claim must be renewed each calendar year by February 15, or the employee’s withholding status reverts to “single with zero allowances.”
- Earned Income Credit Eligibility Notification
The IRS requires employers to furnish employees who were employed at any time during the calendar year, and who did not have any income tax withheld during that year, with written notification that they may be eligible for the refundable earned income credit (EIC). SDSU Research Foundation satisfies this requirement by including the EIC notification, “Notice to Employee,” on the back of the IRS Form W-2. (PDF Format, 195 KB)*
IRS Form W-5 (PDF Format, 120 KB)* is used by employees in order to claim or cancel advance payment of the federal earned income credit. Those employees who expect their annual adjusted gross income to be less than an amount specified by the IRS, and who meet the other criteria specified on Form W-5, (PDF Format, 120 KB)* may file this form with SDSU Research Foundation. After tax withholding has been calculated and withheld based upon the information supplied on the Form W-4, (PDF Format, 100 KB)* the advance payment is calculated and added to the net salary. Employees may claim or cancel the advance at any time during the year. Form W-5 (PDF Format, 120 KB)* is only valid with wages paid through December 31 and must be renewed each year.
- Withholding Method
SDSU Research Foundation uses the percentage method for withholding federal income tax for the computerized payroll computation. Supplemental wage payments such as commissions, retroactive wage increases, special payments, etc. are combined with regular wages in a single payment and taxed accordingly.
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