Federal Income Tax Deductions

Federal Tax Calculation

Federal income taxes are generally based on the marital status and number of allowances you claim on your W-4 form. They are withheld from pay using the IRS percentage method.

To update your W-4 marital status and allowances: Log in to the My Pay tab in MyU. Then click on W-4 Tax Information.

To help determine the number of allowances to claim on your W-4 form: See the IRS’s Withholding Calculator.

Supplemental Tax Withholding

Although income taxes on wages are generally withheld using the IRS percentage method and the Minnesota (or other state) rate formulas or tables, some taxes are withheld at "supplemental" rates. Currently, the IRS flat supplemental rate is 22%. The Minnesota rate is 6.25%; other states' rates vary. The taxes may be calculated at either the percentage method or flat rate method, depending on 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. It includes such things as severance or dismissal pay, vacation pay, back pay, bonuses, moving expenses, overtime, taxable fringe benefits, and commissions. That rate (currently at 22%) is subject to change annually. The University applies the supplemental rate of withholding to these types of 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)
  • Termination agreement
  • Vacation payout

In addition, Social Security and Medicare taxes (currently 7.65%) may also be withheld from supplemental wages, if applicable.

Earned Income Credit

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

More Information

For general tax information, see these IRS web pages: