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Payroll Tax

  • Additional Medicare Questions
    • What is the rate of the Additional Medicare Tax? The rate is 0.9 percent (%).
    • What wages are subject to Additional Medicare Tax? All wages that are currently subject to Medicare Tax are subject to Additional Medicare Tax if they are paid in excess of the applicable threshold for an individual’s filing status. For more information on what wages are subject to Medicare Tax and additional questions, refer to IRS Publication 15, (Circular E), Employer’s Tax Guide.
    • When are indivduals liable for Additional Medicare Tax?  An individual is liable for Additional Medicare Tax if the individual’s wages, compensation, or self-employment income (together with that of his or her spouse if filing a joint return) exceeds the threshold amount for the individual’s filing status:
      • Married Filing Jointly (Threshhold Amount:  $250,000)
      • Married Filing Separately (Threshhold Amount:  $125,000)
      • Single (Threshhold Amount:  $200,000)
      • Head of Household [With Qualifying Person]  (Threshhold Amount:  $200,000)
      • Qualifying Widow(er) with Dependent Child  (Threshhold Amount:  $200,000)
  • FICA and Medicare (OASDI)
    • What is the FICA?  The Federal Insurance Contributions Act (FICA) is the federal law that requires you to withhold two separate taxes from the wages you earn. It includes Social Security Tax and Medicare Tax at a flat percentage rate. The Social Security Tax is 6.2% rate of your wages, and the Medicare Tax is 1.45% of your wages.
    • What is the FICA cap?  Social Security Tax is subject to a cap, which is adjusted every year for inflation. The 2017 cap is $127,200.00.  There is no cap on Medicare Tax.
    • Is there a student exemption to FICA (Social Security and Medicare) taxes?  Students who are enrolled and employed by the University of Houston may be exempt from paying FICA taxes if they meet certain eligibility criteria established by the IRS.  More information is available on the Tax Website.
    • What are Social Security and Medicare (OASDI) taxes?  OASI stands for Old Age and Survivor's Insurance. OASI is also known as Social Security. All employees are subject to this withholding unless exempt by visa status and length of presence in the U.S. or by the student employee rules. The Social Security and Medicare rates, as well as the Social Security wage limit, are updated annually and posted on the Internal Revenue Service website.
  • W2 and W2C Questions
    • Why doesn't my W-2 reflect my December earnings paid in January?  The IRS requires employers to report wages on tax form W-2 in the year in which the wages were paid. Wages for the December are paid in January and are therefore reportable in the following calendar year.
    • I did not work for the University of Houston last year, so why did I receive a W-2?  Form W-2 reports wages paid during the year, not wages earned during the year. The University of Houston pays monthly salaries on the first working day of the following month. If your last day worked was in December of one year and you were paid in January of the following year, those wages would be reported on the W-2 for the second year.
    • I started working in December, but did not receive a W-2.  Why not?  Wages for December are normally paid in January of the following year. If you started working in December you probably did not receive a payment until January, and those wages will be reported on next year’s W-2. The W-2 reports wages paid during the year, not wages earned during the year.
    • Why is the amount in Box 1 not the same as my calendar year to date gross pay amount? The amount reflected in Box 1 represents taxable wages for a given calendar year. The amounts reflects gross wages less pre-tax deductions such as medical, dental and life insurance premiums, pre-tax parking, retirement contributions, tax sheltered annuity contributions, Texflex, etc.
    • Why is the amount in Box 3 and Box 5 more than the amount in Box 1?  Boxes 3 and 5 report your social security and Medicare taxable wages. Some deductions that are sheltered from income tax are not sheltered from social security and Medicare. These deductions include tax sheltered annuities, deferred compensation, Teacher Retirement, and Optional Retirement.
    • Why is the amount in Box 3 less than the amount in Box 5?  There is an annual maximum on the amount of wages subject to social security retirement deductions. These deductions stop when your salary reaches that maximum. There is no maximum on the Medicare portion of the social security taxes.
    • Why was Social Security and Medicare (OASDI) taxes not taken out of my checks?  The IRS exempts student employees who work at their own university and are employed in a position that requires them to be a student, from Social Security taxes as long as they are enrolled and attending classes half time. Certain foreign employees are also exempt from Social Security for a limited time period.
    • Why is there no amount listed in Box 12?  The Retirement Box is checked, and I had retirement deductions taken out.  Voluntary retirement contributions, such as to a tax sheltered annuity, ROTH, or deferred compensation plan contributions are reported in Box 12. TRS and ORP contributions are not voluntary, and therefore are not required to be reported in Box 12.
    • Why is there an amount listed in Box 12DD?  Will I be taxed on this amount?  This amount is both the employee and employer cost for health insurance coverage for the year, which is required to be reported on W-2 forms beginning in 2012.  This reporting to employees is for their information only. The reporting is intended to inform them of the cost of their health care coverage and does not cause excludable employer-provided health care coverage to become taxable.