12 December 2016 IRS issues early release of 2017 federal income tax percentage method withholding The IRS issued Notice 1036 containing the tentative 2017 percentage method tables for income tax withholding. Keep in mind this information could be revised by legislative enactments before year end. Employers and tax practitioners should check for updates here. The Social Security and Medicare tax rates for both the employer and the employee remain unchanged at 6.2% and 1.45%, respectively. Also unchanged is the Additional Medicare tax. Employers are required to withhold Additional Medicare tax of 0.9% on Medicare wages in excess of $200,000. There is no employer contribution. For 2017, apply the following procedure to determine the amount of federal income tax withholding to be deducted from the wages of nonresident alien employees performing services within the US. Add the amounts shown on the chart on the following page to their wages, and apply the withholding tables to compute the federal income tax withholding. Note: Nonresident alien students from India and business apprentices from India are not subject to this procedure. Amount to add to nonresident alien employee's wages for calculating 2017 income tax withholding only
The following is a reprint of the tax year 2017 annual percentage method of federal income tax withholding.
As in 2016, employers may optionally use a flat income tax withholding rate of 25% on supplemental wages provided income tax was withheld from regular wages in the current or previous year. A flat federal income tax rate of 39.6% must be used on supplemental wages paid to an employee in 2017 in excess of $1 million. The 39.6% flat rate applies even if the employee claims exemption from federal income tax withholding on the Form W-4. For more information concerning supplemental wages, see IRS Publication 15. Check out the Ernst & Young 2016 payroll checklist here.
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