1 Payroll Deductions BUSINESS OFFICE 202 STEPHANIE PITTMAN BREMEN PUBLIC SCHOOLS
2 Mandatory Deductions Social Security (OASDI) Employee deduction - 6.2% Wage Base Limit $117,000 Employer Matching Social Security 6.2% Medicare Employee deduction 1.45% No Wage Base Limit Additional Medicare Tax Withholding Wages over $200,000 Employer Matching Medicare 1.45% Source for additional information - Publication 15 Employer s Tax Guide
3 Mandatory Deductions cont. Federal Income Tax based on withholding status and exemptions claimed on form W-4 Withholdings are based on income tax withholding tables located in Publication 15 State Income Tax based on exemptions claimed on form WH-4 Withholdings are based on gross wages less deduction constant (exemption value) X 3.4% County Income Tax based on exemptions claimed on WH-4 and county of residence or principal employment on January 1 Withholdings are based on gross wages less deduction constant (exemption value) X the county rate Sources for additional information Federal Income Tax Publication 15 - State and County Income Tax IN Department of Revenue Departmental Notice #1
4 Mandatory Deductions Example A In these examples, Hugh Jackman is claiming Married with 3 exemptions on his W-4. He is claiming 3 personal exemptions and 1 dependent exemption on his WH-4. He lives and works in Marshall County. He is paid bi-weekly. Gross Pay $2, Social Security $2, X.042 Medicare $2, X.0145 Federal Income Tax Tax Tables State Income Tax ($2, ) X.034 Local Income Tax ($2, ) X.0125 Net Pay $1,613.14
5 MARRIED Persons BIWEEKLY Payroll Period (For Wages Paid through December 2014) And the wages are And the number of withholding allowances claimed is At least But less than The amount of income tax to be withheld is $1,500 $1,520 $143 $120 $97 $74 $58 $43 $27 $12 $0 $0 $0 1,520 1, ,540 1, ,560 1, ,580 1, ,600 1, ,620 1, ,640 1, ,660 1, ,680 1, ,700 1, ,720 1, ,740 1, ,760 1, ,780 1, ,800 1, ,820 1, ,840 1, ,860 1, ,880 1, ,900 1, ,920 1, ,940 1, ,960 1, ,980 2, ,000 2, ,020 2, ,040 2, ,060 2, ,080 2,
6 Indiana Department of Revenue Departmental Notice #1 Deduction Constant Table Table A Daily Weekly Bi-Weekly Semi-Monthly Monthly Table B
7 Indiana Counties That Have Adopted A County Income Tax (Effective Oct. 1, 2014) A county with an asterisk (*) has increased or decreased its rate since Departmental Notice #1 was last issued on Jan. 1, A county in bold and underlined has adopted a new county income tax. County County Tax Resident Nonresident Name Code Type Rate Rate Madison 48 COIT Marion 49 COIT Marshall 50 CAGIT Martin 51 COIT/CEDIT Miami 52 COIT/CEDIT *Monroe 53 COIT Montgomery 54 COIT/CEDIT Morgan 55 CAGIT/CEDIT
8 Post Tax Voluntary Deductions Limit voluntary deductions to approved vendors and only per policy. Certain Types of Insurance Union Dues Foundation Donations United Way Donations Safety Shoes Program Gym Memberships The more deductions you allow, the more work you make for yourself. Find the balance between providing services for your employees and being their financial manager.
9 Example B Gross Pay $2, Social Security $2, X.042 Medicare $2, X.0145 Federal Income Tax Tax Tables State Income Tax ($2, ) X.034 Local Income Tax ($2, ) X.0125 United Way Deduction 5.00 Net Pay $1, Post tax deductions have no impact on the mandatory deductions.
10 Not subject to: Pre-Tax Section 125 Deductions Social Security Employee and Employer Obligations Medicare Employee and Employer Obligations Federal Income Tax State Income Tax County Income Tax Examples Medical Insurance, Dental Insurance, Vision Insurance, Dependent Child Care Expenses, Un-reimbursed Medical Expenses, some Supplemental Insurance (Cancer, Accident), Health Savings Account Contributions
11 Example C Gross Pay $2, Medical Insurance Social Security ($2, ) X.042 Medicare ($2, ) X.0145 Federal Income Tax ($2, ) Tax Tables State Income Tax ($2, ) X.034 Local Income Tax ($2, ) X.0125 United Way Deduction 5.00 Net Pay $1,462.64
12 Annuity/Retirement Deductions Subject to: Social Security Medicare Fed Income State Income Cnty Income 403b Y Y N N N 457b Y Y N N N Roth 403b Y Y Y Y Y Employer Paid TRF/PERF 3% Employee Paid TRF/PERF 3% Voluntary TRF/PERF N N N N N Y Y Y Y Y May be pre or post tax Determined by District Policy
13 Example D Gross Pay $2, Medical Insurance b Contribution Social Security (2, ) X.042 Medicare (2, ) X.0145 Federal Income Tax (2, ) Tax Tables State Income Tax (2, ) X.034 Local Income Tax (2, ) X.0125 United Way Deduction 5.00 Net Pay $1,423.97
14 Trial Balance/941/UC5/W2 Reconciliation Trial Balance Trial Balance Gross 7,067, Federal W/H 643, OASDI Gross 6,569, OASDI W/H 407, , Medicare Gross 6,569, Medicare W/H 95, , State W/H 212, Local W/H 81, UC5 Gross Annuities W/H 141, st Qtr 1,856, Section 125 W/H 498, nd Qtr 1,734, rd Qtr 1,837, Gross 7,067, th Qtr 1,637, Sec , Total 7,067, Annuities 141, ,427, Box 2 Box 5a Box 3 Box 5a Box 5c Wages SS & Med Wages Fed Inc Tax Social Security Medicare 1st Qtr 1,699, ,716, , , , nd Qtr 1,522, ,614, , , , rd Qtr 1,697, ,713, , , , th Qtr 1,508, ,524, , , , Total 6,427, ,569, , , ,502.35
15 Starting and Stopping Deductions Collect deductions in advance Refund deductions upon separation if possible make adjustments on the final paycheck to avoid tax adjustments FMLA and Lost Time Collect deductions according to your district policy If an employee is provided group health insurance, the employee is entitled to the continuation of the group health insurance coverage during FMLA leave on the same terms as if he or she had continued to work. If family member coverage is provided to an employee, family member coverage must be maintained during the FMLA leave. The employee must continue to make any normal contributions to the cost of the health insurance premiums. An employee on unpaid FMLA leave must make arrangements to pay the normal employee portion of the insurance premiums in order to maintain insurance coverage. If the employee s premium payment is more than 30 days late, the employee s coverage may be dropped unless the employer has a policy of allowing a longer grace period. DOL, Wage and Hour Division, Fact Sheet #28A Document deduction changes
16 Must be court ordered Read withholding order to find Total amount to deduct Percent or amount to deduct per pay Where to send the payments Withholding Orders For regulations -
17 Disposable Earnings Disposable earnings for garnishments equals the gross pay minus legally required deductions: Federal income tax State income tax Local income tax Social Security Medicare Withholdings for employee retirement systems required by law For more information on limits and the order of withholding -
18 Child Support Order From: Withholding limits: You may not withhold more than the lesser of: 1) the amounts allowed by the Federal Consumer Credit Protection Act (CCPA) (15 U.S.C. 1673(b)); or 2) the amounts allowed by the State or Tribe of the employee/obligor s principal place of employment (see REMITTANCE INFORMATION). Disposable income is the net income left after making mandatory deduction such as: State, Federal, local taxes; Social Security taxes; statutory pension contributions; and Medicare taxes. The Federal limit is 50% of the disposable income if the obligor is supporting another family and 60% of the disposable income if the obligor is not supporting another family. However, those limits increase 5% - to 55% and 65% - if the arrears are greater than 12 weeks. Withhold the lesser of 1) amount specified in order or 2) the federal limit based on circumstances.
19 Delinquent Property Taxes IC /15 requires educational institutions to certify the name and address of each person who is employed by the governmental entity. The county treasurer is required to notify the governmental entity of any persons with delinquent taxes. The disbursing officer shall periodically make deductions from money due the person. IC limits the garnishment deduction to the lesser of 1) 25% of the disposable earnings or 2) 30 times the federal minimum hourly wage. More details to the limitations can be found at IC A support withholding order takes priority over a garnishment order irrespective of their dates of entry or activation. If an employee has a support withholding order and a garnishment order, the garnishment order shall be honored only to the extent that the maximum amount is not exceeded.
20 Small Claims Court Garnishment Order Small Claims Garnishments follow similar guidelines to Delinquent Property Tax Withholding. Maximum Garnishment of Disposable Earnings under Normal Circumstances* for the $7.25 Minimum Wage Weekly Biweekly Semimonthly Monthly $ or less: None More than $ but less than $290.00: Amount above $ $ or more: Maximum 25% $ or less: None More than $ but less than $580.00: Amount above $435 $580 or more: Maximum 25% $ or less: None More than $ but less than $628.33: Amount above $ $ or more: Maximum 25% $ or less: None More than $ but less than $ : Amount above $ $ or more: Maximum 25%
21 Defaulted Federal Student Loan & Other Defaulted Federal Debt Student Loan The Higher Education Act allows the DOE s agencies to garnish up to 10% of disposable earnings. These are subject to federal wage garnishment law regarding limits. Other Federal Debt The Debt Collection Improvement Act allows an agency to garnish up to 15% of disposable earnings.
22 Now What? What to do with the withholding Federal Income Tax, Social Security and Medicare Submit both employee withholding and employer share (Social Security and Medicare) via electronic funds transfer on EFTPS. See Publication 15 for guidelines on depositing taxes when to deposit, how to deposit and penalties for late deposits or insufficient deposits. Monthly deposit schedule total tax liability for the 4 quarter look back period = $50,000 or less deposit taxes by the 15 th of the following month Semi-weekly deposit schedule total tax liability for the 4 quarter look back period = more than $50,000 deposit taxes according to schedule Payday=Wednesday, Thursday or Friday deposit by the following Wednesday Payday=Saturday, Sunday, Monday or Tuesday deposit by the following Friday $100,000 Next Day Deposit rule if you accumulate $100,000 or more in taxes on any day during a monthly or semi-monthly deposit period, you must deposit the tax by the end of the next business day.
23 Now What? What to do with withholding State Income Tax and Local Income Tax Submit State and Local income tax via electronic funds transfer at Intax. Effective January 1, 2013, all entities are required to remit withholding statements electronically by using either a third-party vendor or INtax. - Departmental Notice #5 Withholding Threshold Amounts: Early Filer - If the average monthly withholding tax liability for the preceding year is more than $1,000. Monthly Filer - If the preceding year s withholding is less than $1,000. Note: A business is defaulted to monthly filing, unless approval is granted by the Department. Annual Filer (Calendar Year) - If the preceding year s withholding is less than $1,000 and approval is granted by the Department. Filing Frequency Due Dates: Annual: January 31 of the year following the close of the tax year Monthly: 30th day of the month following the taxable month Early Filer: 20th day of the month following the taxable month
24 Now What? What to do with withholding TRF and PERF Submit both employee withholding and employer share via electronic funds transfer at INPRS-ERM. ERM Functions Manage employer information including bank account information Enroll employees and manage employment events (last day, leaves, etc.) Upload wages and contributions on a payroll frequency basis Resolve wage and contribution transactions that did not pass validations Submit wage and contribution reports for payment Child Support Withholding Submit withholding via electronic funds transfer at Child Support Employer Payment System Indiana Code, Section requires employers with fifty (50) or more employees and more than one child support obligor to process those payments electronically to the State Central Collection Unit. This law went into effect July 1st 2002.
25 Questions? Stephanie Pittman Treasurer Bremen Public Schools