The South Carolina Department of Revenue released the 2020 income tax withholding computer formula and wage-bracket tables to its website. As we reported, the Department has created a new Form SC W-4, South Carolina Employee's Withholding Allowance Certificate for use beginning in 2020. (EY Payroll Newsflash Vol. 20, #203, 12-6-2019.)

State Form SC W-4 requirements

The Department created new Form SC W-4, South Carolina Employee's Withholding Allowance Certificate for use beginning in 2020. According to the Department, it closely resembles the 2019 federal Form W-4 but includes an area to claim state personal allowances. The Department created the new state Form SC W-4 to match its withholding tables and because the 2020 federal Form W-4 removed allowances.

Before 2020, Form SC W-4 was a specialized form for nonresident military spouses claiming a South Carolina withholding exemption. This exemption is now included as a checkbox on the new SC W-4.

South Carolina employees who are hired on or after January 1, 2020 must complete both the 2020 SC W-4 and the 2020 federal W-4. If employees hired in 2020 do not provide their employer with a 2020 SC W-4, the employer must withhold state income tax as if the number of allowances claimed for South Carolina withholding purposes is zero.?

Employees hired before 2020 need only submit the new 2020 SC W-4 if they want to make state changes to their previously submitted federal Form W-4 on or after January 1, 2020 or they claimed exempt from?South Carolina withholding in 2019.

Employers should submit a copy of the Form SC W-4 to the Department if the employee has claimed 10 or more allowances, or the employer believes that any part of the employee's SC W-4 is fraudulent.? (Frequently asked questions, Department website.)

Supplemental withholding rate

The supplemental withholding rate will remain at 7.0% for 2020, the highest rate on the computer formula tables. (Email response to inquiry, withholding tax section representative, December 17, 2019.)

Calculating 2020 taxable income for withholding purposes

The 2020 computer formula provides that employers should deduct the following from gross wages to arrive at taxable income subject to withholding:

• A yearly personal exemption equal to $2,590 per personal exemption claimed on state Form SC W-4 ($0.00 if zero exemptions claimed)
• A yearly standard deduction amount equal to 10% of gross wages up to $3,820 if claiming one or more exemptions ($0.00 if zero exemptions claimed)

For example, an employee earning $39,000 per year with three exemptions has $7,770 deducted from gross income as personal exemptions (three exemptions x $2,590) and $3,820 deducted from gross income as the standard deduction (gross wages x 10%), resulting in $27,410 that is subject to South Carolina income tax withholding in 2020.

2019 Forms W-2 filing reminder

Form WH-1606, South Carolina Withholding Fourth Quarter and Annual Reconciliation Return and calendar year 2019 Forms W-2 are due by January 31, 2020.

Employers submitting 250 or more Forms W-2 must file electronically over the Department's MyDORWAY system. Employers filing fewer than 250 Forms W-2 may file on CD-ROM or paper with Form WH-1612, Transmittal Form for W-2s. Electronic filing specifications for 2019 can be found here.

Forms 1099 reporting South Carolina income tax withholding must also be filed on CD-ROM or paper with the Department by January 31, 2020. If the IRS or Social Security Administration requires you to file Forms W-2C, W-2G or 1099 electronically, you must file these forms by CD-ROM to the South Carolina Department of Revenue. Only Forms W-2 can currently be filed electronically on MyDORWAY.

For more information about South Carolina withholding tax, see the Department's website, call +1 844 898 8542 or send an email to withholdtax@dor.sc.gov.

———————————————

———————————————
ATTACHMENT

EY Payroll News Flash