EmpowHR: Section 8 - ESS

State Tax

For processing purposes, the tax year usually begins in Pay Period 25 and ends in Pay Period 24. All taxes withheld for those inclusive pay periods are reported on the IRS Form W-2, Wage and Tax Statement.

A new tax certificate may be processed at any time to change an employee’s tax information. If the employee’s duty station or residence changes and the new local tax location has an agreement with Treasury for mandatory withholding, a new tax certificate should be processed. All previously processed exemptions, additional withholdings, etc., will be removed and must be reprocessed, if applicable. If a new tax certificate is not processed, the Payroll/Personnel System (PPS) will begin withholdings at the highest taxable rate if the duty station has a mandatory tax withholding agreement

You may be exempt from withholding of State tax on the basis of limited earnings or other reasons determined by the State. If exemption is allowed by the State, type Only (ONL) in the Total Number of Allowances field, to indicate the employee is exempt from withholding.

Some States do not provide State withholding exemption certificates for establishing an exemption status; others do not require the processing of State tax withholding data since the income tax formulas are based on a percentage of Federal income tax, Federal exemption status, or a percentage of annual wages. If the State tax withholding is based on the Federal withholding and a Form W-4 is not processed, Federal and State Income Taxes will be automatically withheld at the rate of single with zero exemption until a Form W-4 is entered for processing.

Unless otherwise indicated, State tax deductions for lump sum payments and cash awards are withheld based on the employee’s State tax exemptions recorded in the database.