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Payroll Tax Information

Quick Links: Withholding Allowance Certificates | Employee's Statement of Nonresidence in Iowa  |  Non Resident Alien   |  Paycheck Calculator  |  Fellowship Payments  |  Student FICA  |  Other Links

Payroll Tax Information

 

Withholding Allowance Certificates
(W-4)

A withholding allowance certificate is required to be completed for the state in which you perform the services for The University of Iowa.  Some states use the Federal W-4 form as they do not have their own W-4 form.  The State of Iowa has a reciprocal agreement with the State of Illinois.  If you are a resident of Illinois and working in Iowa you may chose to have Illinois withholding.  Completion of the Iowa W-4 and Illinois W-4 can be done directly on the self service website, except if you are claiming exempt or claiming a large number of allowances then you must complete the paper form.  Paper copy links for the following can also be found on the self service website.  Reminder:  It is good idea to review these W-4 forms in December of every year to see if any changes need to be made.   Also if you do claim exempt, you MUST complete a new Form W-4 by February 15 of every year.

 

Nonresident Alien Information

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Paycheck calculator

To determine what effect your W-4 allowances will have on your net pay, you might want to visit the web site of paycheckcity.com, an online collection of paycheck tools.  You will need to have a copy of your latest earnings statement.  All deductions listed under before-tax deductions are exempt from Federal, FICA and state taxes, except for TIAA-CREF deductions and GSRA; those are exempt from Federal and state taxes. 

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Fellowship Payments

For individuals who receive fellowship payments through The University of Iowa Payroll Office, the following rules apply:

 

Fellowship recipients are required to follow the rules imposed by the Tax Reform Act of 1986 revised section 117 of the Internal Revenue Service Code as it applies to Scholarships and Fellowships. Under current law, for degree candidates, only tuition and related expenses such as books, fees, supplies and equipment required for courses can be excluded from income. For recipients who are not degree candidates, no exclusions are allowed.

The University of Iowa cannot help a fellowship recipient determine if their payments are taxable or not. If a recipient is unsure if their payments are taxable, they should consult with a professional income tax preparer.

Fellowship payments to U.S. citizens are not reported on a W-2 or any other income tax reporting document. The total amount of fellowship income that an individual received from The University of Iowa Payroll Office can be found on the Employee Self Service website shortly after the calendar year-end. The amount can be found in the “Personal” tab under “Year-End Taxes”.

Fellowship payments to nonresident aliens who are in F-1 or J-1 immigration status are subject to 14% federal tax withholding unless tax treaty covered.  These fellowship payments are reported on 1042-S form.

Fellowship payments are not subject to social security or Medicare tax withholding.

Fellowship payments to U.S. citizens do not have any federal or state income tax withholding. If the fellowship recipient determines that their income is taxable, the recipient is required to make quarterly estimated income tax payments to the Internal Revenue Service and to the State of Iowa. The forms and instructions to make the payments can be found at the following websites:

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Student FICA Information

Students who are employed in a student position and are at least half-time undergraduate, graduate or professional students are exempt from FICA tax.

Undergraduate students must be registered for 6 credit hours or more during the Fall, Spring and Summer Sessions and 0 credit hours or more during the Winter Session to be exempt from FICA tax.

Graduate students must be registered for 5 credit hours or more during the Fall and Spring Sessions, 3 credit hours or more during the Summer Session and 0 credit hours or more during the Winter Session to be exempt from FICA tax.   

However, half-time enrollment standards may vary by college and/or discipline; therefore, you should contact the Registrar's Office to find out if you are enrolled half-time or more.    

Graduate students may be exempt from FICA tax if:      

Nonresident aliens who are currently in F-1 or J-1 immigration status are exempt from FICA tax UNTIL they have met the IRS Substantial Prescence Test (SPT). 

According to an IRS article on The Social Security and Medicare Tax Liability of Foreign Students, Scholars, Teachers, Researchers, and Trainees:

Foreign students in F-1 and J-1 status who have been in the U.S. less than 5 calendar years are considered nonresident aliens for tax purposes and are exempt from FICA tax.  Foreign students in F-1 and J-1 status who have been in the U.S. more than 5 calendar years are considered resident aliens for tax purposes and are liable for FICA tax unless the students qualify for the student FICA exemption requirements mentioned above. Thus, payroll will start withholding FICA tax beginning January 1st of the sixth calendar year in the U.S.

Foreign scholars, teachers, professors, trainees, and researchers in J-1 status who have been in the U.S. less than two calendar years are considered nonresident aliens for tax purposes and are exempt from FICA tax.  Foreign scholars, teachers, professors, trainees, and researchers in J-1 status who have been in the U.S. more than two calendar years are considered resident aliens for tax purposes and are liable for FICA tax. Thus, payroll will start withholding FICA tax beginning January 1st of the third calendar year in the U.S.

If an individual is employed in a professional position and a student position, they will be required to pay FICA tax on their professional position.  Professional positions typically receive a benefits package, which is a prohibiting factor for FICA tax exemption.  However, nonresident aliens who are in F-1 or J-1 immigration status will be exempt from FICA tax until they have met the IRS Substantial Presence Test (SPT).  This exemption is based on immigration status, NOT student status.

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