The Oklahoma State Tax Commission (OTC) released the state income tax withholding tables for tax year 2020. The 2020 annual percentage method is unchanged from 2019 and the annual withholding allowance amount remains at $1,000. (Packet OW-2, 2020 Oklahoma Income Tax Withholding Tables.)

State Form OK-W-4 required

Employees are required to submit state Form OK-W-4, Employee's Withholding Allowance Certificate, to their employers. The form was created in 2018 in response to federal changes under the Tax Cut and Jobs Act (TCJA). Form OK-W-4 should be used by new employees and any employees who wishes to make changes to their Oklahoma state income tax withholding. Use of the federal Form W-4 for Oklahoma state income tax withholding purposes is no longer allowed. (Informational notice, April 4, 2018; Oklahoma Tax Commission Rule Section 710:90-1-5, revised April 18, 2018; EY Payroll NewsFlash Vol. 19, #070, 4-11-2018.)

Employees who submitted federal Form W-4 to their employer prior to March 1, 2018, are not required to submit the new Form OK-W-4 unless changes need to be made to Oklahoma state income tax withholding.

Supplemental wages

The supplemental rate of income tax withholding continues at 5.0% for 2020, the highest applicable tax rate.

• Treatment of supplemental wages combined with regular wages. An employer who pays supplemental wages combined with regular wages and does not specify or separate the amount of each should withhold income tax as if the total payment were a single payment for a regular payroll period. Supplemental wages include bonuses, commissions, overtime pay, vacation pay, sick leave pay, back pay, retroactive wage increases or payment for nondeductible moving expenses.
• Treatment of supplemental wages paid separately or combined in a single payment. Supplemental wages that are paid separately or combined in a single payment, with the amount of each specified, are subject to withholding according to one of the following methods:

• If the employer withholds tax from the regular wages use one of these two methods for supplemental wages:

1. Withhold at the highest applicable rate for the taxable year (5.0% for 2020).
2. Add the supplemental and regular wages for the most recent payroll period. Calculate the tax as if the total constitutes a single payment. Subtract the tax already withheld from the regular wages. Withhold the remaining tax from the supplemental wages.

• If tax was not withheld from an employee's regular wages, the provisions in (2) above should be used. This situation would occur, for example, when the value of the employee's withholding allowances claimed is more than the wages.

• Treatment of overtime, vacation and sick pay. Overtime, vacation and sick pay are subject to withholding tax as if they were a regular wage payment. If paid in addition to the regular wage, they are considered a supplemental wage. (Oklahoma Tax Commission Rule Section 710:90-1-6, revised April 18, 2018.)

2019 Form W-2 filing reminders

Employers or their payroll providers are required to use Oklahoma Taxpayer Access Point (OKTap) to either upload files or manually enter calendar year 2019 Form W-2 information directly into OkTAP using a modified EFW2 format. The deadline for electronic submission is January 31, 2020. Paper forms and magnetic/optical media (i.e., flash drives, diskettes, CDs) and Form G-141, OTC - Transmittal of Magnetic Media Tax Return will not be accepted. Those that are received will be shredded and considered not filed. Penalties may apply.

See the OTC's W-2 and W-3 FAQs for more information. Employers unable to meet the January 31, 2020 deadline or who have questions should contact the OTC at +1 405 521 3160 or by email toW2ExtensionRequest@tax.ok.gov.

Forms 1099 must also be filed electronically with the OTC, unless the payer is participating in the Federal Combined Fed/State program. See the OTC's 1099 FAQs for more information.

For more information on Oklahoma state income tax withholding, see the OTC website.

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