### For Wages Paid on January 6, 2020 and Later

## OASDI (Social Security) and Medicare Taxes

Wages for OASDI (Social Security) and Medicare are calculated by adding all earnings (including any taxable fringe benefits) less the following qualifying pre-tax deductions: insurance, parking, and UT FLEX. OASDI and Medicare taxes are calculated as follows:

- Find OASDI - Taxable Wages on the payslip, and multiply by 6.2 percent. The OASDI Taxable Wages have a wage limit of $137,700 for the current tax year.
- Find Medicare - Taxable Wages on the payslip. Multiply by 1.45 percent on wages up to $200,000. Multiply by 2.35 percent on wages above $200,000.

## Federal Withholding Taxes

Federal Withholding Taxable Wages are calculated by adding all earnings (including any taxable fringe benefits) less all pre-tax deductions, and less any applicable 1042-S Wages. The tax rate(s) used in the calculation are specific to earnings being paid.

Most payroll earnings use the IRS Percentage Method Tables for Income Tax; however, non-regular earnings (including, but not limited to: Awards, One-Time Merits, Relocation and Taxable Moving payments) use the Supplemental Wage flat rate of 22 percent.

## IRS Percentage Method

To check your Federal Withholding Tax calculation for *all earnings* on the payslip, use the IRS Percentage Method below:

- Find Federal Withholding – Taxable Wages in the Taxable Wages section of the payslip
*.* - Annualize this amount based on the pay period frequency: If Monthly, multiply by 12; if Semi-Monthly, multiply by 24.
- If you are a nonresident alien for tax purposes, with the exception of students from India, add:

- $8,000 if you are using a 2019 or earlier version of the W-4 Form.
- $12,200 if you are using a 2020 version of the W-4 Form.

- Find the Withholding section on the payslip.
- If you are using a 2019 or earlier version of the W-4 Form, follow these steps:

- Subtract $4,300 for each Allowance.
- Find the Marital Status claimed, go to the IRS 2020 Percentage Method Table below, and use the appropriate status section of the table.
- Find the row that your calculated amount falls in to. Take your calculated amount and:

- Subtract the “of the amount that the Adjusted Annual Wage exceeds…” amount
- Multiply by the percentage reflected in that row.
- Add the dollar amount reflected in “The tentative amount to withhold is…” column.

- If you have a Monthly pay period frequency, divide by 12; if Semi-Monthly, divide by 24.
- From the Withholding section of the payslip, if an Additional Withholding amount is reflected, add that amount to your calculated amount.
- This should match the Federal Withholding amount in the Employee Taxes section of the payslip for this payment.

- If you are using the 2020 version of the W-4 Form, follow these steps:

- Add the amount listed as “Other Income” from the Withholding section of the payslip, if any.
- Subtract the amount listed as “Deductions” from the Withholding section of the payslip, if any.
- See if “Multiple Jobs or Spouse Works” from the Withholding section of the payslip is “Yes” or “No”.

- If “Yes”, do not subtract any amount.
- If “No” and your Marital Status is Married filing Jointly, subtract $12,600.
- If “No” and your Marital Status is any status other than Married filing Jointly, subtract $8,400.

- If the calculation is now a negative number, use $0.00. Otherwise, continue using the amount you have calculated.
- Find the row on the IRS Percentage Method Table below that your calculated amount falls in to. Use the orange table if you selected “No” in Step 2 of the W-4 Form, “Multiple Jobs or Spouse Works”. Use the blue table if you selected “Yes” in Step 2 of the W-4 Form, “Multiple Jobs or Spouse Works”.

- Subtract the “of the amount that the Adjusted Annual Wage exceeds…” amount
- Multiply by the percentage reflected in that row, and
- Add the dollar amount reflected in “The tentative amount to withhold is…” column.

- If you have a Monthly pay period frequency, divide by 12; if Semi-Monthly, divide by 24.
- Divide the amount listed as “Total Dependent Amount” from the withholding section of the payslip, if any, by your pay period frequency (12 if Monthly, 24 if Semi-Monthly).
- Subtract this de-annualized “Total Dependent Amount” from your calculated total from step f above. If this is now a negative number, use $0.00. Otherwise, continue using the amount you have calculated.
- Add the amount listed as “Additional Amount” from the Withholding section of the payslip, if any.
- This should match the Federal Withholding amount in the Employee Taxes section of the payslip for this payment.

## Supplemental Earnings Method

When a payslip includes recurring supplemental earnings (like a Faculty Endowed Supplement), these earnings are treated the same as regular salary and taxed based on the IRS Percentage method.

When a payslip includes only one-time supplemental earnings, multiply by 22 percent to calculate the Federal Withholding Tax amount for these earnings.

When a payslip includes earnings that are taxed using both methods (IRS Percentage and 22 percent one-time supplemental earnings), follow the steps below:

- Categorize the earnings into both types, and total each category.
- Allocate all the pre-tax deductions against both totals and subtract to arrive at two separate Federal Withholding – Taxable Wages amounts.
- Multiply the supplemental earnings’ Federal Withholding – Taxable Wages by 22 percent.
- Follow the IRS Percentage Method steps above to calculate the Federal Withholding Tax amount for the other earnings.
- Add the two Federal Withholding Tax amounts together to match the total amount of Federal Withholding Taxes deducted on the payslip.

*Last updated 05/21/2020*