Federal Tax Data

Federal tax is withheld through payroll deductions based on the processing of Form W-4. Federal income tax withholding is based on an IRS formula that includes the number of allowances claimed and a tax-withholding table for marital status. From this calculation, the tax amount is determined based on the taxable income amount and the tax percentage. The formula is located on the NFC Home Page under Publications.

This section will show the user how to enter Federal Income Tax data from an employee's W-4.

Before beginning, the following information is needed and can be found on the employee's W-4:

• Marital status of the employee.
• Total number of tax exemptions to be claimed by the employee.
• Any additional withholding amount (in dollars and cents).

Federal income tax is withheld based on the processing of Form W-4. If a W-4 is not processed, Federal income tax will automatically be withheld at the rate of single with zero exemptions until a W-4 is processed.

A Federal income tax certificate does not need to be processed for employees reassigning to another Agency serviced by NFC within the same Department. However, employees transferring from one Department to another Department serviced by NFC must submit a new W-4 at the time the accession action is processed.

An employee may choose to claim exempt if no Federal tax was owed the prior year and the employee does not expect to owe any tax in the current year. The employee must file a W-4 before February 15 of each year if total exemption is claimed. Otherwise, tax withholding will automatically be withheld based on single with zero exemptions.

Note: Employees whose duty station is the republic of Panama, Virgin Islands, Guam, or the Northern Mariana Islands, may be exempt from Federal income tax. If exempt, the employee must file a W-4 indicating exempt status.

Federal income tax is withheld at a rate of 22 percent on all cash awards and bonuses. For annual-leave and compensatory-time lump sum payments, an employee can choose to have Federal income tax withheld based on the Federal income tax withholding exemption code in PPS or at the 22-percent rate.

Employees claiming 10 or more allowances and employees claiming total exemption from withholding (with wages exceeding $200 a week) will be reported to the IRS. Once under IRS control, the number of allowances cannot increase without the approval of IRS, and a W-4 cannot be processed in PPS.

If the number of allowances decreases while under IRS control, the change can be processed in PPS. The original W-4 must be submitted via ServiceNow.

If the number of allowances decreases while under IRS control, the change can be processed in PPS. The IRS control is only released upon notification from IRS.

An employee may choose to claim exempt if no Federal tax was owed the prior year and the employee does not expect to owe any tax in the current year. The employee must file a W-4 before February 15 of each year if total exemption is claimed. Otherwise, tax withholding will automatically be withheld based on single with zero exemptions.

Note: Employees whose duty station is the Republic of Panama, Virgin Islands, Guam, or the Northern Mariana Islands, may be exempt from Federal income tax. If exempt, the employee must file a W-4 indicating Exempt status.

 

Note: Since resident and nonresident aliens are taxed differently, it is important to determine the correct status. Once an employee has been determined to be a nonresident alien subject to wage withholding, they must complete a Form W-4, Employee’s Withholding Allowance Certificate for Nonresident Alien. A nonresident alien cannot claim exemption from withholding on Form W-4. They must use Form 8233, Exemption from Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual to claim a tax treaty exemption from withholding.

In completing Form W-4, nonresident aliens should use the following instructions instead of the instructions on Form W-4:

• Elect Single marital status on line 3 (regardless of actual marital status).
• Claim only one withholding allowance under total number of allowances on line 5, unless a resident of Canada, Mexico, South Korea, or a U.S. national.
• Write "Nonresident Alien" or "NRA" above the additional withholding amount.
• Elect an additional amount withheld, if applicable (nonresident alien employees are not required to request an additional withholding amount).
• Do not claim "Exempt" withholding status on line 7.

Nonresident alien students and business apprentices from India are not subject to this special withholding. Students and business apprentices who are eligible for the benefits of Article 21(2) of the United States-India income tax treaty can claim additional withholding allowances on line 5 for their spouses. In addition, they can claim an additional withholding allowance for each dependent who has become a resident alien.

To enter the Form W-4 into the entry systems (e.g. EPP, PPS) reflected above, the following instructions apply:

• Select N (Nonresident Alien - Single) from the Filing Status field.
• Enter only one withholding allowance under total number of allowances claimed.
• Enter any additional amount withheld.

Federal income tax is withheld at the rate of 22 percent on all cash awards and bonuses. For annual leave and compensatory time lump sum payments, an employee can choose to have Federal income tax withheld based on the Federal income tax withholding exemption code in PPS or at the 22 percent rate.

Note: Spot awards are grossed up to 25 percent