All payroll payments at the university are subject to federal employment taxes consisting of OASDI (Social Security), Medicare, and Federal Withholding, unless exempted by law. Exemptions from these taxes may be due to a student employee exemption (IRC Section 3121(b)(10)), a nonresident tax treaty, or a nonresident exemption (IRC Section 3121(b)(19)). Employees that reside or work outside the state of Texas may also be subject to state and/or local taxes depending on the laws governing that jurisdiction. Taxes withheld are remitted to the Internal Revenue Service (IRS), and/or the applicable state/local entity on the employee’s behalf and reported on IRS Form W-2 after calendar year-end.
For the current calendar year tax rates, please see the following page:
OASDI (Social Security) and Medicare Taxes
OASDI is the Old Age, Survivors, and Disability Insurance program, also known as Social Security. It is the federal benefits program that provides benefits to retirees, disabled persons and their survivors. Medicare is the federal healthcare program for individuals over 65 years of age, as well as younger people who meet specified eligibility criteria.
Both OASDI and Medicare are mandatory federal payroll taxes. These taxes are calculated based on a fixed percentage of wages. OASDI is subject to an annual wage limit, at which point the tax ceases, while Medicare is a two-tiered calculation with an additional tax on wages above a set earnings limit. A detailed explanation of how each tax is calculated, along with the corresponding wage limit, can be found on the pages bulleted above.
FICA, the Federal Insurance Contributions Act, is used to reference both the employee and employer portions of OASDI and Medicare taxes.
Federal Withholding Taxes
Federal withholding taxes for most payroll payments are calculated using the rates in the IRS Percentage Method Tables for Income Tax. Rates are subject to change by the IRS each year. The calculation is based on the employee’s residency status and Withholding Elections (Form W-4) on file with the university.
Supplemental Wages are payments to an employee that are not considered regular earnings. They include but are not limited to, Award, One-Time Merit, Relocation, and Taxable Moving earnings. The Supplemental Wage tax is a flat rate of 22 percent.
State and Local Taxes
State and local income taxes are withheld from employees’ paychecks when a primary home or work address is in a state or locality that has an income tax withholding requirement. The employees’ state and local tax elections (or federal tax election in some cases) will be used to calculate the appropriate taxes. The calculation for each state and locality differs.
Previous Year Tax Rates
Previous year tax rates are available for historical purposes below.
- 2019 Tax Rates
- 2018 Tax Rates (Workday Wages paid after Nov. 7, 2018 – Jan 2, 2019)
- 2018 Tax Rates (Legacy Wages paid Jan. 2018 – Nov. 7, 2018)
- 2017 Tax Rates
- 2016 Tax Rates
- 2015 Tax Rates
Last updated 05/14/2020