Administrative Policies and Procedures Manual - Policy 2635: Payroll Deductions, W-2s, and Tax Reporting
Date Originally Issued: 11-01-1991
Revised: 03-21-1997, 01-01-2008, 01-01-2012
Authorized by RPM 6.3 ("Privileges and Benefits")
Process Owner: University Controller
Each pay period, an employee's gross pay may be reduced by various deductions. Some deductions are required by law, whereas others are optional and may be withheld at the request of the employee. Specific types of payroll deductions are listed below. The University Controller must approve the types of deductions which can be processed through the payroll. For additional information about a payroll deduction, the employee or department may contact the University Payroll Office. By January 31 of each year, the University Payroll Office mails Wage and Tax Statements (W-2 forms) to all employees who had earnings in the previous calendar year. The W-2 reports the employee's total income and tax information for the previous year and is used by the employee in preparing individual income tax returns. The same information is reported by the University to the Internal Revenue Service, the Social Security Administration, and the New Mexico Taxation and Revenue Department.
2. Payroll Taxes
The Internal Revenue Service (IRS) and other taxing agencies require that taxes be withheld from taxable pay of all employees unless the employee qualifies for an exemption.
A percentage of gross pay is deducted for both FICA Tax (Social Security) and FICA Medicare Tax contributions. Social Security and Medicare tax withholding determinations are based on Section 218 of the Social Security Act or the State of New Mexico Master Agreement with the Social Security Department. Effective July 1, 1991, this applies to all University employees other than student employees. Student employees are exempt from both the FICA Tax and FICA Medicare Tax deductions as long as they are enrolled in the required number of classes.
2.2. Federal Income Tax
The calculation of federal income tax withholding is based on information submitted by the employee on the W-4 form. Employees complete a W-4 when initially hired, when there is a change in dependent status, or the employee wishes to change the amount of tax withheld (within IRS restrictions). Employees can change their W-4 using LoboWeb (Employee Self Service)
2.3. New Mexico State Income Tax
The calculation of state income tax withholding is based on information submitted by the employee on the W-4 form. An employee may request to have an additional amount withheld for state tax only or to claim exempt status from state tax based on residency in another state by going to the Payroll Office to complete the required forms. The University calculates and withholds state income tax for the State of New Mexico only.
2.4. Tax Exemption for Non Resident Aliens
Employees who are citizens of and permanent residents of another country may qualify for exempt status from FICA, federal, and state taxes. To apply for this exemption, employees must present their required INS documents at the Payroll Office and complete the required electronic forms.
2.5. W-2s and Tax Reporting
By January 31 of each year, the University Payroll Office mails Wage and Tax Statements (W-2 forms) to all employees who had earnings in the previous calendar year. The W-2 reports the employee's total income and tax information for the previous year and is used by the employee in preparing individual income tax returns. The same information is reported by the University to the Internal Revenue Service, the Social Security Administration, and the New Mexico Taxation and Revenue Department. W-2 forms are mailed to the employee's home address listed on LoboWeb (Employee Self Service). It is the employee's responsibility to verify and maintain accurate address information in Banner. Employees who lose their W-2 may request a duplicate W-2 from the Payroll Office.
3. Other Deductions
3.1. Required Deductions
3.1.1. Retirement Contributions
Contributions to the Educational Retirement Fund or an Alternative Retirement Program (for eligible employees as defined in UAP 3625 ("Retirement") are required for all employees except categories exempted by state statute:
Information about retirement is available from the University Department of Human Resources (HR) Benefits Office and on the http://www.nmerb.org/ New Mexico Educational Retirement Board website. Retirement contributions are calculated as a percentage of gross pay. Retirement contributions are not subject to federal and state income tax in the year they are deducted, but they may be subject to these taxes if they are withdrawn. The New Mexico Educational Retirement Plan is a qualified benefit plan, which limits the amount that a participating employee may invest in an IRA.
3.1.2. Workers' Compensation Annual Assessment
Every three (3) months, a fixed amount, currently $2, is deducted from the gross pay of all employees as required by state law.
3.2. Mandated Deductions
Other deductions may be mandated on an individual basis by court order or governmental agency. Such deductions may be required for child support, a tax levy, or a Writ of Garnishment. Mandated deductions are taken after taxes and retirement contributions, and before all optional deductions. University policies may also mandate deductions for debts owed the University.
3.3. Optional Deductions
Premiums for a variety of insurance plans may be paid through payroll deduction by regular staff or faculty with at least .50 FTE. Plans include coverage for health, dental, vision, life, disability, and AD&D insurance. Eligible employees may also elect to enroll in the Pre-Tax Insurance Premium Plan (PIPP), which allows the University to deduct health, dental, and/or vision insurance premiums from gross pay before taxes are calculated. Additional information is available from the HR Benefits Office.
3.3.2. Flexible Spending Accounts
Flexible Spending Accounts allow eligible employees to set aside a portion of their annual salary to pay eligible unreimbursed medical expenses and qualified dependent care expenses incurred during the year before taxes are calculated. Additional information is available from the HR Benefits Office.
3.3.3. Parking Fees
Eligible employees may pay fees for parking permits by payroll deduction at a fixed rate per pay period. Employees may elect to have these fees deducted from gross pay before taxes are calculated. Temporary staff and faculty, and undergraduate student employees are not eligible for this deduction.
3.3.4. Fixed Transfers to Financial Institutions
An employee may choose to have a fixed amount from each paycheck directly deposited to accounts at various financial institutions.
3.3.5. Charitable Contributions
Eligible employees may choose to pledge contributions to the United Way, UNM Lobo Club, or the UNM Campaign through a payroll deduction. Contributions to the UNM Foundation may be designated by the employee to specific programs of the University as long as there is no personal benefit gained by the employee through the contribution. Contact the UNM Foundation for applicable forms.
Eligible employees may choose to pay union dues or dues to the UNM Faculty/Staff Club or the Lobo Club through payroll deductions.
3.3.8. Locker Fees
Eligible employees may choose to have a deduction for locker fees at the Johnson Center.
4. Faculty Paid in Ten (10) Installments
Some payroll deductions are doubled in May and August for faculty members with nine (9) month contracts who choose to be paid in ten (10) monthly installments, from August through May. To ensure continuous coverage/membership, insurance premiums and UNM Faculty/Staff Club dues must be paid for twelve (12) months. Extra insurance and UNM Faculty Club deductions are taken in May and August to cover the months of June and July.