The government reduction in Social Security payroll taxes (“tax holiday”) ended Dec. 31, 2012. The employee tax rate for Social Security will return to 6.2% from 4.2%, resulting in 2 percent less in after-tax pay beginning in the first January 2013 paycheck. This tax break was not extended in the Act passed by Congress on Jan. 1, 2013.

 Estimated 2 percent increase for Social Security Payroll Taxes:

Additional Medicare Tax On Wages Over $200,000

The current Medicare tax rate of 1.45% will continue continue for 2013, but an additional Medicare tax of .09% will be withheld on wages paid  to an employee in excess of $200,000 during the calendar year.

Federal Withholding Tax Rates

The Act maintains the current income tax rates for individuals earning up to $400,000 and families earning less than $450,000. The maximum marginal rate for employees making more than these amounts will now be 39.6% up from 35%.

Teaching and research graduate tuition remission is tax exempted by IRS Code Section 117. Graduate assistantships that are not involved in teaching or research were specifically excluded from this exemption thereby making the tuition remission related to these assistantships taxable. However, the tuition remission for these assistantships may be tax exempted under IRS Code Section 132 and Treasury Regulation 162(a) which allows education benefits from employers to be tax exempted for certain courses of study.

The purpose of the Graduate Assistant Tuition Remission Form is to determine the type of graduate assistantship and then determine if the assistantship is taxable or exempted. If the graduate assistantship is teaching or research, it is exempted by definition under IRS Code Section 117. If the graduate assistantship is a service assistantship, then the “Assistantship Duties and Responsibilities” are designed to allow the University to determine if the assistantship is taxable or exempted under Treasury Regulation 162(a) by comparing the duties of the assistantship to the course of study.  Read more in Frequently Asked Questions.

Staff who are classified as graduate level students taking courses required by their employer or to maintain or improve skills needed in their present job are exempt from taxation.  To claim this exemption, please complete the Job Related Tuition Waiver Form.  This form requires both the signature of the employee and the department head.  Once the form has been completed, return the form to the University Wide Payroll Office at P115 Andy Holt Tower, Knoxville TN, 37996 or email it to rchance@tennessee.edu.

Beginning Spring Semester 2012, the university will begin withholding taxes on the non-qualified graduate fee waivers once the $5,250 excludable amount has been reached for the calendar year.  The in-state and out-of-state graduate fee waiver value will be prorated over several months and taxed according to the following schedule.

Because the fee waiver value (over the $5,250 in a calendar year) will be added to the taxable income on your check and taxed at the W4 graduated rate, you can take your specific tax situation in consideration and submit a new W4 to your campus Human Resources/Payroll Office to adjust the amount withheld.  Please see your personal tax advisor for further advice.

Effective January 1, 2012, Tennessee state law requires that the work authorization status of all newly hired employees must be verified through the federal E-Verify program. The E-Verify process must be completed within 3 days of an employee’s hire date.  Failure to comply with these regulations can result in substantial penalties to the University, with fines up to $2,500 per violation and $2,500 per person not properly verified.

The pressure on us as an institution is that we now have only three days to complete both:

• The I-9 form (federal form for which specific types of identification and work authorization documents must be presented) AND
• The electronic E-Verify process.

The I-9 form is generally filled out in the hiring department; the E-Verify process will be done in HR/Payroll.

To ensure we are able to verify work authorization status in E-Verify within this 3 day window, departments must complete all sections of the I-9 form and fax or deliver a copy of the completed I-9 to HR/Payroll on the first day of hire. Whenever possible, departments are encouraged to have new hires complete the I-9 form prior to their start date. We can run the E-Verify check any time after a prospective employee has accepted an offer of employment, but the E-Verify check MUST be done with 3 days of the date of hire.

This means that no individual can be put on University payroll prior to the E-Verify check being performed.  This applies to all new hires:  regular staff, faculty, term, and student workers.  A properly completed Form I-9 and accompanying documents must be submitted promptly to the Office of Human Resources in order for HR to complete E-Verify in a timely manner.

As part of the university’s efforts to reduce costs, effective August 1, 2009, employees will no longer receive paper copies of pay statements.  The on-line pay statement includes all of the information previously received on paper pay statements.  Employees can view, print, email and/or download their current pay statement as well as pay statements from the previous three years, using their UTC ID and password.  Read MORE…