University of Minnesota
Office of Human Resources
http://www.umn.edu/ohr
612-625-2016

Federal Income Tax Deductions

Federal Tax Calculation

Federal income taxes are generally based on your W-4 marital status and number of allowances claimed. They are withheld from pay using the IRS percentage method of withholding. See the appropriate biweekly percentage rate table below.

Supplemental Tax Withholding

Although income taxes on wages are generally withheld using IRS percentage method and the State rate formulas or tables, some taxes are withheld at "supplemental" rates. Currently, the IRS flat supplemental rate is 25 percent, and the Minnesota State rate is 6.25%, other states' rates vary. The taxes may be calculated at either the percentage method or flat rate method, depending upon how the supplemental wages are paid—combined with regular wages, or paid out separately.

IRS defines supplemental wages as compensation paid in addition to the employee's regular wages that includes, but is not limited to, severance or dismissal pay, vacation pay, back pay, bonuses, moving expenses, overtime, taxable fringe benefits, and commissions.  That rate (currently at 25%) is subject to change annually with the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001.

The University will apply the supplemental rate of withholding to the following supplemental wages:

  • Athletic Contract Supplement
  • Bonus/Commission
  • Late Pay
  • Layoff, Non-Renewal
  • Moving Expenses Taxable Benefit
  • Non-Qualified Deferred Compensation
  • Relocation Lump Sum
  • Retirement Contribution
  • Settlement Awards
  • Special Payment (as defined by the Office of Tax Reporting and Compliance)
  • Terminal Agreement
  • Vacation Payout

Earned Income Credit

Earned Income Credit (EIC) is a refundable IRS tax credit for certain workers. To determine if you're eligible to receive a federal tax refund due to EIC, read IRS Notice 797 (pdf).