Federal Income Tax / Form W-4
As a new employee, you should complete and submit an IRS Form W-4 Employee’s Withholding Allowance Certificate to establish the appropriate federal income tax withholding from your paycheck. At any time after the initial W-4 setup, you can update your W-4 online via Employee Self Service in my.SMU.edu to change your federal income tax withholding.
The Form W-4 is divided into five "steps" (sections). The only two steps required for all employees are Step 1, where you enter personal information like your name and filing status, and Step 5, where you sign the form. If you only complete Step 1 and then sign the form, your withholding will be computed based on your filing status's standard deduction and tax rates, with no other adjustments. Complete Steps 2-4 only if they apply to you. Per the IRS FAQs, doing so will make your withholding more accurately match your liability.
Refer to the IRS Withholding Calculator for guidance on how to complete Form W-4 based on the details of your tax personal situation.
If a new employee does not provide a completed Form W-4, income tax is withheld based on the IRS default of a single filer with no other adjustments.
Claiming “exempt” from federal income tax withholding
An employee may claim “exempt” from federal tax withholding on his or her Form W-4. For more information, refer to the IRS guidelines at the top of Form W-4 about the conditions under which an employee may be exempt from federal income tax withholding.
The employee’s claim to be exempt from federal income tax withholding is only effective for the calendar year in which the exemption is claimed, and will automatically expire on February 15 of the following year unless the employee submits a new Form W-4 claiming to be exempt from federal income tax withholding for the next calendar year.
Medicare and OASDI Taxes (a.k.a. FICA)
The Federal Insurance Contributions Act (FICA) is supported by OASDI (social security) and Medicare taxes. These are commonly referred to as one tax (FICA) – but they actually have different tax rates. Only the OASDI tax has a wage base limit that is adjusted annually. (Click here to see the maximum wages for the current and previous years.)
There are no withholding allowances for OASDI and Medicare taxes. The employee tax rate for OASDI is 6.2% of wages up to the wage base limit (updated annually); for Medicare, the tax rate of 1.45% is applied to all covered wages.
Additional Medicare Tax
Under the Patient Protection and Affordable Care Act, the Medicare tax rate increased 0.9% (for employee withholding only) – from 1.45% to 2.35% – on wages paid over $200,000, effective for taxable years after December 31, 2012.
The statute requires an employer to withhold additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year, regardless of whether the employee will actually reach the applicable threshold. Any discrepancies between the amount withheld and the amount of the employee's actual liability for the additional Medicare tax will be reconciled on the individual's income tax return (Form 1040). Refer to the IRS Web site for additional information.
FICA Tax Exemptions
There are three provisions for FICA tax exemption that may apply to SMU employees:
- Student FICA exemption: Applied automatically to a student worker's wages earned at SMU while the student is enrolled in credit-bearing courses at SMU
- Minister’s FICA exemption: Ordained clergy may contact the Payroll Office for details
- Nonresident Alien FICA exemption: International students and foreign nationals working for SMU should contact the Foreign Nationals Office for details