Federal Income Tax
The university must withhold federal income tax from employees’ wages. The amount withheld is based on the employee’s W-4 form and withholding tables that are built into the OMNI Payroll System. Annual income and withholding tax is reported on a W-2 form each January.
Social Security and Medicare Taxes
The university must withhold applicable social security and medicare taxes from employees’ wages. Social security taxes have a maximum wage cap that is indexed annually. There is no cap on medicare taxes. The university must contribute the same amount as is withheld from the employee’s wages. These amounts are also reported annually on the W-2 form.
Additional Medicare Tax
Highly compensated employees are also subject to the additional medicare tax of 0.9%. There is no employer match on this tax. This is also reported annually on the W-2 form.
Fringe Benefits
Fringe benefits are included in an employee’s gross income, except where they are specifically excluded from income by law. These benefits are subject to income tax withholding, social security, and medicare tax. Fringe benefits include cars and flights on airplanes that the employer provides, free or discounted services, free or discounts on property, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events.
Payroll Tax Policies
The payroll policies for Finance and Administration are listed under 4-OP-D-2-E Payroll.
