What are FICA-OASDI and FICA-MEDICARE?
- These are mandatory taxes based on the Federal Insurance Contribution Act. All employees, except for students enrolled in at least half time status and certain Non-Resident Aliens, must pay these taxes. FICA taxes are based on a flat percentage of your taxable income.
What are Federal Withholding and State Withholding?
- These are income taxes. USC uses the withholding allowances and marital status claimed on your Form W-4 and/or DE-4 to determine the amount of taxes to withhold from your wages for federal and state income tax; the higher your allowance, the smaller the amount withheld. USC uses the “percentage method” to calculate Federal taxes. If you qualify, you may also claim “EXEMPT” from any withholding. The University cannot give tax advice. For further details, visit the IRS Form W-4 Withholding Allowance Calculator.
What does “EXEMPT” on the W-4 Form mean?
- Claiming exempt from withholding means that you expect to have no tax liability on your personal tax return at the end of the year. To claim exempt from federal withholding, you need to fill out a W-4 Form and write the word “EXEMPT” on line 7. See Form W-4 and/or Form DE-4 for more details, and to determine if you qualify to claim “exempt”. You must renew your exemption status every calendar year by February 15; otherwise taxes will be held. It is your responsibility to re-file as necessary.
Are student earnings automatically exempt?
- NO! See the CWSP & Student Questions for more information.
What are the differences among “exemptions”, “allowances” and “deductions”?
- For W-4 and DE-4 purposes, these terms are interchangeable and all refer to the number of allowances you can claim. Taxation is based on gross pay versus the marital status and the number of allowances claimed. “Allowances” does not necessarily mean “dependents” for tax purposes.
Are Tuition Assistance benefits taxable?
- The Tuition Assistance benefit is intended to provide benefits that are, to the extent possible, excluded from taxation under IRS Code Sections 117(d) and 127 (when in effect) and other applicable laws. Nonetheless, many benefits provided will constitute taxable income to the employee, and the employee sponsoring his or herself, child and/or spouse, or a former employee sponsoring his or her child is responsible for any tax liability resulting from employer-provided tuition assistance. The University is required by law to report to the Internal Revenue Service the gross amount of the tuition assistance received subject to taxes and the taxes withheld as part of an employee’s earnings. The gross amount is taxed and reported in the same semester in which the benefit is received.
- Currently, graduate courses taken by an employee’s or former employee’s child or employee’s spouse are taxable income and subject to withholding and reporting to the Internal Revenue Service.
- Currently, tuition assistance benefits for graduate courses taken by an employee are considered taxable and reportable as income to the employee who exercises the benefit, and are only exempt from taxable income and reporting to the Internal Revenue Service if the employee is taking graduate courses that are job related. The employee must file a Tuition Assistance Affidavit for Job-Related Education Form prior to the beginning of each semester while taking graduate courses. Failure to do so will result in the value of the tuition assistance benefits being added on to the employee’s income and taxes withheld. No refund of taxes will be granted once taxation occurs. You may download the Tuition Assistance Affidavit for Job-Related Education Form, or obtain one from the Office of Benefits Administration on the University Park campus and Personnel Services on the Health Sciences campus.
- Currently, if the child of an employee or former employee entitled to receive tuition assistance qualifies as the employee’s or former employee’s dependent under applicable Internal Revenue Code provisions, the employee or former employee will be asked to certify to this on a Tuition Assistance Dependent Child Certification Form provided by the University. In the case of a sponsoring employee or former employee who cannot certify to this effect, any tuition assistance for undergraduate courses taken by the child will be considered taxable and reportable income. This form must be filed when the sponsoring employee or former employee first exercises the benefits, and it must be renewed in the beginning of each calendar year while the dependent child is taking undergraduate courses. Any change in status must be reported to University Payroll Services for appropriate action. You can download the Tuition Assistance Dependent Child Certification Form, or obtain one from the Office of Benefits Administration on the University Park campus or Personnel Services on the Health Sciences campus.
Following is the Tuition Assistance Benefits taxation schedule. The gross amount of the benefit will be divided into three and added to the employee’s monthly pay and taxed accordingly. This may have a significant impact to an employee’s net pay. Former employees will receive a year-end tax form for the taxable Tuition Assistance Benefit received.
| Benefit Taken | Months taxed | |
 | ||
| Spring semester | February, March and April | |
| Summer sessions | July, August and September | |
| Fall semester | October, November and December |
An employee with questions regarding the taxes withheld from his or her paycheck may contact University Payroll Services. (The University does not provide tax advice. An employee is advised to contact a tax consultant for more information.)
You can obtain a copy of the Tuition Assistance Benefits policy from the University Policies Web Site or from the Office of Benefits Administration on the University Park campus or Personnel Services on the Health Sciences campus.
What is the Earned Income Tax Credit (EITC)?
- The EITC is a special credit that reduces the amount of tax you owe (if any) and is intended to offset some of the increases in living expenses and social security taxes. For further information, refer to the Earned Income Tax Credit page at the IRS website.
I believe I am owed a tax refund. What should I do?
- Complete a Tax Refund Request Form, and submit it to your Home Department Coordinator. Payroll Services will investigate your request and make a determination. Please note that a refund cannot be granted if you made a mistake or changed your mind in filing the W-4/DE-4. Payroll Services can only grant refunds in limited situations.