Supplemental Federal Income Tax Rate

John P. Kruczek, University Controller

The Economic Growth and Tax Relief Reconciliation Act of 2001 was signed into law June 7, 2001. A recent memorandum advised you of the new federal income tax withholding table rates effective July 1, 2001. This memorandum is to advise you that the Supplemental Federal Income Tax Rate changes from the current 28% rate to 27.5% effective August 6, 2001.

This tax rate change will affect the gross payment on Departmental Superior Accomplishment Awards defined in Florida Rule 6C1-3.040(2)(a)(6). This rule allows departments to pay employees who meet certain criteria a net check of $50.00 and the employer pays all the taxes. The gross amount of the award was $77.71 and will be $77.10. The ability to process these payments via the Payroll system was announced in my Memorandum dated August 23, 1999. Therefore, any Departmental Superior Accomplishment Awards payments for the payday, R56, on August 10, 2001 will require the new amount of $77.10.

In addition to the effect on Departmental Superior Accomplishment Awards, the tax rate change will affect the amount withheld on Bonus and Extra State Compensation payments. These payments are withheld at the lesser of the Alternative Tax Method or 27.5%. The Alternative Tax Method uses the gross amount of the most recent prior payment and the current Bonus or Extra State Compensation payment to determine which method will result in the lower federal income taxes.

Please direct questions regarding this change to Murphy Miller (mjmiller@ufl.edu) at 392-1231.