Federal Withholdings

Wages subject to federal employment taxes generally include all pay given to an employee for services performed.  The pay may be in cash or in other forms (i.e. gift cards).  It includes salaries, vacation allowances, bonuses, commissions, and fringe benefits.  Federal withholdings are calculated using the information turned in on form W-4, Employee’s Withholding Allowance Certificate.  This form should be updated periodically and can be done online at my.acu.edu.  To help in determining how many withholding allowances to claim on form W-4, you can utilize the Withholding Calculator on the IRS website at www.irs.gov/individuals.  If a form W-4 is not submitted, the maximum amount of taxes will be withheld.

Generally, an employee may claim exemption from federal income tax withholding if he or she had no tax liability last year and expects none this year.  A form W-4 claiming exemption from withholding is valid for only 1 calendar year.  To continue to be exempt from withholding in the next year, an employee must turn in a new form W-4 by February 15 of that year.  If a new form is not turned in, the maximum amount of taxes will be withheld.

If you are a nonresident alien for tax purposes, different rules may apply.  Please refer to Publication 15 (circular E) and publication 515, both available at www.irs.gov.