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SECTION 4 – A.S. Payroll

Section 4.4 - Payroll Deductions

Date: 11/20/06 — Approved: Finance Board

The AS is required by Federal and State regulations to withhold certain deductions from wage payments. The requirements for each required withholding differs according to the deduction and the wages being paid. Full-time employees can also request voluntary deductions, such as supplemental retirement funds, and deductions to pay for certain work related expenses, such as parking.

FEDERAL TAX WITHHOLDING

To ensure proper Federal tax withholding, all employees are required to complete Form W-4, Employee's Withholding Allowance Certificate, or an appropriate substitute form. The amount of tax withheld is based on marital status and the number of allowances indicated on Form W-4. The employee may also indicate a whole dollar amount to be withheld in addition to the required withholding. Employees should contact their tax advisors to determine the proper number of allowances needed for their tax liability for the year. If Form W-4 is not submitted, taxes will be withheld at the rate for the marital status of single with no allowances. If an employee's tax status changes, a new Form W-4 must be submitted to reflect the changes.

Employees may claim exempt from Federal taxes if they meet the following two requirements:

• In the prior year, the employee received a refund of all Federal income tax withheld because they had no tax liability.
• During the current year, the employee expects a refund of all Federal income tax withheld because they will not have a tax liability.

To claim this exemption, the employee must file a Form W-4 with the Payroll office and write "Exempt" in the required space. This exemption must be renewed annually by submitting a new Form W-4 to the Payroll office by February 16th.

Forms W-4 for employees claiming more than 10 allowances must be sent to the Internal Revenue Service (IRS). If the IRS rejects an employee’s Form W-4, the IRS will determine the filing status allowed.

FOREIGN NATIONAL TAX WITHHOLDING

All foreign national employees must complete their Form W-4 at the Payroll office.

For tax purposes, Nonresident Aliens have special withholding rules. Instructions are available from the IRS web site www.irs.gov. If an employee needs tax advice, please recommend they consult a tax advisor.

INVOLUNTARY DEDUCTIONS

Legal orders requiring deductions from wages, whether pursuant to a support order, bankruptcy, tax levy, or from general creditor debts are termed as involuntary deductions. An employee does not have the authorization to revoke these deductions.

FEDERAL TAX LEVIES

Federal tax levies are wage garnishments by the Federal government for the collection of employees' earnings for unpaid Federal taxes. Federal tax levies are different than most involuntary deductions because the Internal Revenue Service (IRS) gives the employee an exemption of a certain amount and the balance of his/her net pay is required to be remitted to the IRS. The AS will continue to withhold the deductions until the release order is received from the IRS. No changes may be made to the employee's deductions (add, remove, or change amounts of deductions) without approval from the IRS, until the employee has been released from the tax levy.

GARNISHMENTS

Garnishments are court ordered deductions for monies owed to a company or an individual. The AS must answer the garnishment on or before the return date listed on the court order. This allows the court and the garnishment attorney to determine the employee's pay status and calculate the amount of the garnishment deduction. The deduction will begin as soon as the garnishment order is received and continue until it is paid in full. If the employee files bankruptcy or is in the process of filing bankruptcy, the Payroll office must receive an “Automatic Stay” from the bankruptcy attorney to terminate the garnishment deduction.

CHILD SUPPORT

Child support is a payment made by a non-custodial parent, for the support of a child, to a custodial parent in accordance with a court or state agency order. The support amount is stated in the order and it takes priority over a garnishment or any other legal order, except a pre-existing Federal tax levy. Child support orders will not terminate until a release is received from the court or agency issuing the order, or at termination of employment.

The withholding of the support amount will commence the pay period immediately following the date the order was received. The withholdings will be remitted to the applicable child support agency.

VOLUNTARY DEDUCTIONS

Voluntary deductions commence and terminate upon the employee's authorization. The AS allows voluntary deductions that are permitted by Federal and State regulations and have been approved by the A.S. Controller.

Employee Authorizations - Employees must complete the Payroll Deduction form to authorize a voluntary deduction.

Termination of Authorization - Any authorization to withhold from the earnings of an employee will terminate and such withholding will cease for any of the following events:

• Termination of employment
• Written notice by the employee of cancellation of such former authorization
• Expiration of the time during which such withholding was authorized When the total amount authorized has been withheld

ADVANCE EARNED INCOME CREDIT PAYMENT

Employees who are eligible for the Advanced Earned Income Credit (EIC) and have a qualifying child are entitled to receive payments up to the limits set by the IRS. Gross earnings are not affected. To determine eligibility and request the EIC payment, employees must complete the Form W-5, Earned Income Credit Advance Payment Certificate, and submit it to the Payroll Office. Form W-5 is effective only in the calendar year it is submitted to the Payroll Office.

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