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Tax Withholding Information For US Citizens

Last updated Tuesday, August 3, 2021

Federal Withholding Tax

Overview

Most payments to employees have Federal Withholding Tax deducted based on the IRS Semi-Monthly Tax Withholding Table, your IRS Form W-4 Withholding Allowance Certificate, and any pre-tax deductions you have elected.

Payments made separately from salary payments are exceptions to the withholding tax guidelines, as follows:

  • Supplemental Wage payments (e.g., Awards, Employee Separation Authorization Payments—vacation time paid at separation from the UW—as well as some other payments) have a Federal Withholding Tax rate of 22%.
  • Taxable Fringe Benefits (e.g., gift cards, moving expenses, sports tickets, non-job related graduate student tuition over the IRS Section 127 exemption limit, as well as some other payments) have a Federal Withholding Tax rate of 22%.
  • Employee benefits such as health care and retirement are pre-tax reductions and are not included as part of your taxable income.
  • Stipend Payments
    • Scholarship and fellowship payments are not considered wages, and are not reported on Form W-2. Such payments are reported at year end on IRS Form 1098-T.
    • Scholarship and fellowship payments may be paid to individuals who are not students at the University of Washington. At year end, information on such payments are summarized in a letter from the ISC.
    • For additional information on scholarship and fellowship payments, see IRS Publication 970 Tax Benefits for Education (PDF).
    •  The UW does not withhold federal tax for stipends, scholarships, or fellowships. Withholding information on the Form W-4 does not apply to such payments.

University of Washington employees cannot provide personal, legal, or tax advice.

Calculating Your Federal Tax Withholding

Guidance about calculating your Federal withholding can be found on the Calculating Your Withholding page.

Setting Your Withholding Elections (IRS Form W-4)

New Employees – Set your initial withholding elections:
Your IRS Form W-4 must be completed in Workday so that the UW can withhold the correct federal income tax from your pay. Refer to the Add Federal Withholding Elections User Guide for details.

Update your current withholding elections:
Changes to your IRS Form W-4 in Workday can be made at any time throughout the year. Refer to the Update Federal Withholding Elections User Guide for details.

Foreign Nationals:
Foreign National employees have special rules for filling out IRS Form W-4.

Considerations

  • Exempt status on the IRS Form W-4 is valid for one year. If you are eligible to claim Exempt, your W-4 must be renewed each year by February. If your W-4 information is not renewed or updated on time, by IRS law your tax status automatically defaults to the Single tax tables and zero allowances.
  • The University of Washington will not refund federal withholding taxes due to either late or incomplete IRS Form W-4 information.

Additional Withholding Forms Requirements

If you are receiving a pension from the University of Washington, you will need to complete an IRS Form W-4P Withholding Certificate for Pension or Annuity Payments. This must be done on paper and submitted to the ISC.

If you are receiving a supplemental pension from the University of Washington, you will need to fill out IRS Form W-4P Withholding Certificate for Pension or Annuity Payments. If you have questions about your supplemental pension, contact the ISC.


Social Security and Medicare (OASDI)

Overview

Social Security and Medicare (OASDI) are mandatory federal payroll taxes. Federal Insurance Contributions Act (FICA) is the combined employee and employer portions of mandatory OASDI taxes.

Social Security is withheld on taxable gross income up to an annual wage limit each year. Medicare is withheld on taxable gross income. The rate is increased when the minimum subject gross threshold is crossed.

Exceptions to OASDI taxation include:

Calculating Your Social Security and Medicare Withholding

Guidance about calculating your Social Security and Medicare withholding can be found on the Calculating Your Withholding page.


Paid Family and Medical Leave

Refer to the WA Employment Security Department website for information.


WA Medical Aid/Worker’s Comp

Refer to the WA State Department of Labor & Industries website for information.

Guidance about calculating your Medical Aid withholding can be found on the Calculating Your Withholding page.


Working Outside WA State

We strongly recommend out-of-state employees and their supervisors review UWHR’s Remote Work Location and Out-of-State Work Policy.

State Income Tax

Employees working and residing in Washington have no state income tax liability. However, if you are working in a state that does have an income tax, the UW is required to withhold income tax for the state(s) in which your services are performed.

To ensure your taxes will be withheld correctly, employees working in a state with an income tax should:

1. Verify that your Home (Primary) Address in Workday is accurate.
The Home Address you have specified in Workday must reflect your tax residency address. Visit the Managing Your Personal and Work Information in Workday page for guidance.

2. Fill out additional state withholding tax forms in Workday if/as needed.
Refer to the State and Local Withholding Elections User Guide for guidance.


  • Administrators who support employees working in a state with an income tax should verify that the Employee’s Work Location in Workday is set to their state of residence, and correct it if not. If the employee’s Work Location in Workday is set to a WA state address, their pay will be subject to Washington state taxes.

    To verify the employee’s work location, navigate to their Worker Profile page in Workday and, under Job Details, review Location. If the Work Location needs to be updated, follow the guidance found in the Change Job – Data Change – Voluntary Location or Work Shift Change User Guide.


If you have questions, contact the ISC and include “Payroll Tax Inquiry” in the Subject.

US Citizens Working Abroad

Guidance for Foreign Nationals working abroad can be found on the Foreign Nationals Payment & Tax Information page.

Because payments to employees who work outside of the US might not be subject to federal withholding tax, Washington State Medical Aid/Worker’s Compensation taxes or Paid Family Medical Leave tax, steps must to be taken to help ensure you are taxed correctly. Expand the appropriate menu below for guidance.

1. Review and be sure you understand the policy guidance on the Grad School’s Employing/Paying International Students Working Abroad page.

2. The department must confirm/update the employee’s Work Location in Workday. If the Work Location in Workday is set to a local address, pay will be subject to Washington state taxes.

To verify the work location is set to your out-of-country work location, the department should navigate to the Worker Profile page in Workday and, under Job Details, review Location.

Notes for HCM Initiate 2s
⇒ If the employee’s Work Location needs to be updated, follow the guidance found in the Change Job – Data Change – Voluntary Location or Work Shift Change User Guide.
⇒ When updating the Work Location, if the country in which the employee resides/works is not listed, please contact the ISC for guidance.

3. The employee should next verify that their Home (Primary) Address in Workday is accurate, and that they’ve designated a Mailing address. Visit the Managing Your Personal and Work Information in Workday page for guidance.

4. The employee should complete, sign, and mail (NOT email) the IRS’s Form 673 (PDF), permitting the University to exclude federal withholding tax. Mail the Form 673 to the ISC at the address listed at the bottom of the Contact the ISC page.

Later, once you return to the US:

1. The department will need to update the employee’s Work Location in Workday to reflect their US location. This is important to help ensure proper taxation.

2. The employee will need to complete the Form I-9. Federal law requires employees to complete their Form I-9 within three business days of their first day working locally to verify they are authorized to work in the United States.

Before initiating the hire and/or contacting ISC Payroll, follow ALL of these steps, in this order:

1. Review UWHR’s policy regarding international remote work for staff and student employees.

2. Secure required approvals in advance: ensure the appointing authority is aware the employee is working remote internationally and that a telework agreement is in place with the department.

If the employee will be paid from a grant, also ensure there are no compliance issues with the employee working internationally.

3. The department then needs to notify and coordinate the hire with UW Tax Office – contact taxofc@uw.edu.

Once the Tax Office has approved the remote work overseas, the department will need to email the ISC at ischelp@uw.edu with the following statement: “The UW Tax Office has approved remote work overseas for <insert employee’s name and EID>.” Paperwork will not be processed for any request not approved by the UW Tax Office.

Important: Simply notifying the Tax Office does not mean the unit then has approval to hire or transfer, nor does it eliminate the unit’s obligation to seek counsel and ensure compliance with all state- or country-specific laws.

4. The employee should complete, sign, and mail (NOT email) the IRS’s Form 673 (PDF), permitting the University to exclude federal withholding tax. Mail the Form 673 to the ISC at the address listed at the bottom of the Contact the ISC page.

5. The department will then need to confirm/update the employee’s Work Location in Workday. If the Work Location in Workday is set to a local address, pay will be subject to Washington state taxes.

To verify the work location is set to the out-of-country work location, the department can navigate to the Worker Profile page in Workday and, under Job Details, review Location.

Notes for HCM Initiate 2s
⇒ If the employee’s Work Location needs to be updated, follow the guidance found in the Change Job – Data Change – Voluntary Location or Work Shift Change User Guide.
⇒ When updating the Work Location, if the country in which the employee resides/works is not listed, please contact the ISC for guidance.

6. The employee should verify their Home (Primary) Address in Workday accurately reflects their overseas location, and that they’ve designated a Mailing address. Visit the Managing Your Personal and Work Information in Workday page for guidance.

Later, once the employee returns to the US:

1. The department will need to update the employee’s Work Location in Workday to their US location. This is important to help ensure proper taxation.

2. The employee will need to complete the Form I-9. Federal law requires employees to complete their Form I-9 within three business days of their first day working locally to verify they are authorized to work in the United States.

Please note that there is an annual earned income exemption limit for federal withholding tax exemptions. Additionally, federal withholding tax is not withheld if it is reasonable to believe that an employee’s wages would be excluded under the Foreign Earned Income exclusions. For further details, refer to the IRS’s Publication 54 Tax Guide for US Citizens and Resident Aliens Abroad (PDF).