| POLICY: |
Indiana University shall withhold required taxes from employee regular wages in accordance with the provisions of federal and state regulations. Withholding of taxes will be subject to the special provisions outlined below:
Assignment of Compensation - in situations where an employee has the option to either receive certain compensation in cash or have the funds directed to a research account or other location, the employee is in constructive receipt of the compensation. The total amount of the compensation must be added into the employee=s regular wage record, and the appropriate federal and state taxes will be withheld, irrespective of the employee=s choice of disposition of the compensation.
Fee Courtesy for Graduate Level Courses - the IRS requires that the value of employer provided educational assistance benefits, referred to at Indiana University as Fee Courtesy, that are received by IU employees, for graduate level courses that began after June 30, 1996, to be treated as taxable income and included in employee wages. The value of graduate level fee courtesy benefits is subject to regular federal, state, county and local income tax withholding, as well as FICA withholding. Fee Courtesy benefits for undergraduate level courses are not taxable.
Non-Cash Compensation - there are certain items of non-cash compensation which are defined as taxable income under current tax laws and regulations. These include the value of employer provided automobiles, housing allowances, tip income and certain other personal expenses that are paid for the employee's benefit. The fair market value of any non-cash compensation, as defined by IRS valuation methods, will be added to the employee's gross wages and tax will be withheld accordingly.
Social Security - All employees of Indiana University are subject to social security tax withholding, based on the earnings levels and tax rates prescribed by the IRS. Two categories of employees may be exempt from social security tax withholding, depending on the specific facts and circumstances relating to their employment, as follows:
- students who meet the tests, defined in IU Payroll Administration Policy IV-95, for being enrolled and regularly attending classes during the academic semester in which they are employed may be exempt, and;
- nonresident aliens who hold F-1, J-1, M-1 or Q-1 visas, and who are performing employment that is consistent with the provisions of their visa status.
Supplemental Pay - all supplemental payments that are not combined with a regular wage payment and are not related to the current pay period, will be subject to a flat rate of tax withholding as provided by the Internal Revenue Service and the Indiana Department of Revenue. Supplemental payments may include retroactive pay, terminal pay, awards, and other irregular payments. Refer to Supplemental Payment policy IV-70. |
