i. Withholding Allowances
ii. No-Tax-Liability Exemption from Withholding
iii. Earned Income Credit Eligibility Notification
iv. Withholding Method
v. Form 1095-C, Employer-Provided Health Insurance Offer and Coverage Insurance

The basis for withholding federal income tax is determined by the information supplied by the employee to SDSU Research Foundation on IRS Form W-4, Employee’s Withholding Allowance Certificate. This form may not be submitted by employees for a retroactive period and any change requested by the employee will be effective the next pay period after receipt of the W-4 in the payroll department. The effective date of this form is for an entire pay period based upon SDSU Research Foundation payroll deadlines.

i. Withholding Allowances

IRS Form W-4 is used to claim the allowance(s) for self and spouse, dependents, blindness, ages, etc., which exempt portions or all of gross salary of an employee from both federal and state income tax withholding. The W-4 is completed by each employee when hired and may be resubmitted at any time. The W-4 may also be used to request additional federal and state income tax withholding over and above the normal deduction or to report exempt status for state income tax withholding purposes. If an employee does not complete a Form W-4 federal and state income taxes will be withheld from the employee’s salary at the single rate with zero allowances.

When requested by the IRS, Form W-4 must be made available for inspection by an IRS employee. The IRS may also request copies of Forms W-4 for one or more named employees. If the IRS later provides notice in writing that an employee(s) is not entitled to claim exemption from withholding or a claimed number of withholding allowances, federal income tax withholding will be based on the effective date and maximum number of withholding allowances specified in the notice. Variance from the notice will be in accordance with regulations outlined in IRS Publication 15, Employer’s Tax Guide.

ii. No-Tax-Liability Exemption from Withholding

An eligible employee may exclude his or her entire gross salary from federal and state income tax withholding by completing a Form W-4 certifying that he or she had no income tax liability for the preceding year and anticipates none for the current year. This claim must be renewed each calendar year by February 15 or the employee’s withholding status reverts to “single with zero allowances” on all earnings paid after February 15th or until the employee submits a new W-4 to the payroll department.

iii. Earned Income Credit Eligibility Notification

The IRS requires employers to furnish employees who were employed at any time during the calendar year, and who did not have any income tax withheld during that year, with written notification that they may be eligible for the refundable earned income credit (EIC). SDSU Research Foundation satisfies this requirement by including the EIC notification, “Notice to Employee,” on the back of the IRS Form W-2.

iv. Withholding Method

SDSU Research Foundation uses the percentage method for withholding federal income tax for the computerized payroll computation. Supplemental wage payments such as commissions, retroactive wage increases, special payments, etc. are combined with regular wages in a single payment and taxed accordingly.

v. Form 1095-C, Employer-Provided Health Insurance Offer and Coverage Insurance

Benefited employees who work for one month or more in a calendar year will receive a Form 1095-C by March 31 to report the information about offers of health coverage and enrollment in health coverage. Form 1095C is used in determining eligibility for the federal premium tax credit.

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