Federal Personnel and Payroll System (FPPS)

MEMORANDUM

DATE:

January 26, 2023.

TO:

Federal Personnel and Payroll System User Group Representatives

FROM:

Christine Zertuche-Rocha, Chief

Payroll Operations Division

SUBJECT:

Corrected - Action Required: Tax Changes Implemented Pay Period (PP) 2023-02: Federal, PR, AZ, CA, CO, DC, IN, IA, KY, LA, ME, MD, MI, MN, MS, MO, MT, NE, NM, NY, NC, ND, OR, RI, SC, VT and Localities in IN, KY, and NY

(Correction is in bold and underlined for Arizona Income Tax Withholding)

Please share this information with all impacted employees.  The following tax changes were implemented in PP 2023-02.  As a result, employees may see a change in their tax withholdings.  As a reminder, tax changes are not retroactive to employees’ withholdings. 

Federal Tax 

• U.S. Federal Social Security (OASDI) Wage Base – The wage base has increased from $147,000 to $160,200. There is no limit on Medicare wages and the Social Security and Medicare tax rates remain unchanged.

• U.S. Federal 401 (k) Wage Limits - The 401(k) maximum exclusion limit has increased from $20,500 to $22,500. The catch-up contribution for employees who will be age 50 or over in 2023 is increasing from $6,500 to $7,500.

• U.S. Federal Income Tax:
  • For withholding based on a pre-2020 Form W-4, Employee’s Withholding Certificate, the annual amount to add to a nonresident alien's taxable wages prior to calculating withholding has increased from $8,650 to $9,550.
  • For withholding based on a 2020 Form W-4, the annual amount to add to a nonresident alien's taxable wages prior to calculating withholding has increased from $12,950 to $13,850.
  • The standard and high-income tax tables for all marital statuses have changed.

U.S. Territory 

• Puerto Rico 401 (k) Wage Limits:
  • The pre-tax contribution limit has increased the pre-tax contribution limit for U.S. federal employees has increased from $20,500 to $22,500.
  • The catch-up contribution limit for Puerto Rico plans that cover U.S. federal government employees is increasing from $6,500 to $7,500.
  • The catch-up contribution limit for Puerto Rico-Only Plans and Dual-qualified Plans will remain at $1,500. NOTE: This is subject to change.  If this limit changes, another Tax Update will be issued.
  • Datamart Query: Tax State = RQ 

State Tax Changes 

• Arizona Income Tax Withholding:
  • The state income tax withholding formula for Arizona has changed. Starting on February 9, 2023*, the withholding rates that can be elected have changed as follows:

• The default rate for employees who have not submitted an Arizona A-4 form has changed from 2.7% to 2.0%.
• Datamart Query: Tax State = 04

• California Income Tax Withholding:
  • The low income exemption amount for Married with 0 OR 1 exemption and Single is increased from $15,916 to $17,252.
  • The low income exemption amount for Married with 2 or more exemptions and Head of Household is increased from $31,831 to $34,503.
  • The standard deduction for Married with 0 or 1 exemption and Single is increased from $4,803 to $5,202.
  • The standard deduction for Married with 2 or more exemptions and Head of Household is increased from $9,606 to $10,404.
  • The Single, Married, and Head of Household withholding tables have changed
  • The annual personal exemption credit has increased from $ 141.90 to $154.
  • The Single tax table amount where wages are taxed at the 11.33% rate has been increased from $333,639 to $338,639.
  • Datamart Query: Tax State = 06

• Colorado Income Tax Withholding:
  • The flat tax rate on supplemental wages has changed from 4.55% to 4.40%.
  • The standard annual deductions for employees who do not complete form DR 0004 Line 2 or enter additional deduction amounts to their state tax in Employee Express have changed. The annual deduction for employee filing as Married Filing Jointly or Qualifying Window(er) has increased from $8,000 to $9,000.  The annual deduction for all other employees has increased from $4,000 to $4,500.
  • The tax rate on regular wages has changed from 4.55% to 4.40%.
  • Datamart Query: Tax State = 08

• District of Columbia Income Tax Withholding:
  • The income tax withholding formula for the District of Columbia has changed retroactive to January 1, 2022.
  • The annual deduction amount per exemption has increased from $4,150 to $4,300.
  • Datamart Query: Tax State = 11

• Indiana State Income Tax Withholding:
  • The state income tax withholding formula for Indiana has changed effective October 1, 2022.
  • A new exemption has been added equal to $3,000 for each adopted child.
  • The state tax rate changed from 3.23% to 3.15%, effective January 13, 2023
  • Datamart Query: Tax State = 18

• Iowa State Income Tax Withholding:
  • Federal withholding is no longer deducted from Iowa taxable wages.
  • The standard deduction amount for employees claiming zero or one withholding allowance has increased from $2,210 to $13,850.
  • The standard deduction amount for employees claiming two or more withholding allowances has increased from $5,450 to $27,700.
  • The rate table has changed.
  • Datamart Query: Tax State = 19

• Kentucky Income Tax Withholding:
  • The annual standard deduction is increasing from $2,770 to $2,980.
  • The tax rate has changed from 5.0% to 4.5%.
  • Datamart Query: Tax State = 21

• Louisiana State Income Tax Withholding:
  • The income tax withholding formula for the State of Louisiana has been updated effective January 1, 2022.
  • Employees claiming Single marital status and 2 personal exemptions will no longer be taxed as Single claiming only 1 personal exemption.
  • These employees will be taxed based on 2 personal exemptions using the same formula as a Married employee claiming 2 personal exemptions.
  • Datamart Query: Tax State = 22

• Maine State Income Tax Withholding:
  • The annual exemption per allowance claimed has increased from $4,450 to $4,700.
  • The Single and Married standard deduction tables have changed.
  • The Single and Married withholding tables have changed.
  • Datamart Query: Tax State = 23

• Maryland State Income Tax Withholding:
  • The minimum Standard Deduction has increased from $1,600 to $1,700.
  • The maximum Standard Deduction has increased from $2,400 to $2,550.
  • The Maryland - State and Counties Taxing Authorities documentation is being updated to include the following county income tax rate changes.

• Datamart Query: Tax State = 24

• Michigan State Income Tax Withholding:
  • The annual amount per exemption is increasing from $5,000 to $5,400.
  • Datamart Query: Tax State = 26

• Minnesota State Income Tax Withholding:
  • The annual amount per exemption has increased from $4,450 to $4,800.
  • The Single and Married withholding tables have changed.
  • Datamart Query: Tax State = 27

• Mississippi State Income Tax Withholding:
  • The state income tax withholding formula has changed.
  • The tax table has changed.
  • Datamart Query: Tax State = 28

• Missouri State Income Tax Withholding:
  • The flat tax rate for supplemental wages has changed from 5.3% to 4.95%.
  • The standard deduction amount for employees claiming Single, Married Filing Separate, and Married and Spouse Works has increased from $12,950 to $13,850.
  • The standard deduction amount for employees claiming Married and Spouse Does Not Work has increased from $25,900 to $27,700.
  • The standard deduction amount for employees claiming Head of Household has increased from $19,400 to $20,800.
  • Datamart Query: Tax State = 29

• Montana Income Tax Withholding:
  • The annual amount per withholding allowance has increased from $1,900 to $2,070.
  • The withholding table has been updated.
  • Datamart Query: Tax State = 30
• Nebraska Income Tax Withholding:
  • The annual amount per withholding allowance has increased from $2,080 to $2,140.
  • The Single and Head of Household withholding table has been updated.
  • The Married withholding table has been updated.
  • Datamart Query: Tax State = 31

• New Mexico Income Tax Withholding:
  • The Single, Married, and Head of Household withholding tables have changed.
  • Datamart Query: Tax State = 35
• New York Income Tax Withholding:
  • The Single and Married tax tables have changed.
  • Datamart Query: Tax State = 36
• North Carolina Income Tax Withholding:
  • The flat tax rate on supplemental wages has changed from 5.09% to 4.85%.
  • The wage tax rate for all filers has changed from 5.09% to 4.85%.
  • The adjustment based on the minimum additional withholding amount required to be claimed by nonresident aliens has been changed.
  • Datamart Query: Tax State = 37

• North Dakota Income Tax Withholding:
  • The tax tables for all filing statuses have changed.
  • Datamart Query: Tax State = 38
• Oregon Income Tax Withholding:
  • The standard deduction amount for Single filers claiming less than 3 allowances has increased from $2,420 to $2,605.
  • The standard deduction amount for Single filers claiming 3 or more allowances has increased from $4,840 to $5,210.
  • The standard deduction amount for Married filers has increased from $4,840 to $5,210.
  • The annual tax credit amount, per exemption, has increased from $219 to $236.
  • The annualized deduction for federal tax withheld has increased from a maximum of $7,250 to $7,800.
  • The tax tables have changed for all filers.
  • Datamart Query: Tax State = 41

• Rhode Island Income Tax Withholding:
  • The annualized wage threshold where the annual exemption amount is eliminated has been increased from $241,850 to $260,550.
  • The wage table has been updated.
  • Datamart Query: Tax State = 44

• South Carolina Income Tax Withholding:
  • The flat tax rate on supplemental wages has changed from 7.0% to 6.5%.
  • The deduction per personal exemption has increased from $2,750 to $4,310.
  • The maximum standard deduction in case of any exemptions has increased from $4,580 to $6,475.
  • The state tax table has changed.
  • Datamart Query: Tax State = 45

• Vermont Income Tax Withholding:
  • The annual amount per exemption has increased from $4,500 to $4,850.
  • The Single and Married tax tables have changed.
  • Datamart Query: Tax State = 50

Local Tax Changes

• Indiana Local Income Tax Withholding:
• County of Boone:
  • The local income tax for Boone, Indiana has changed effective October 1, 2022.
  • A new exemption has been added equal to $3,000 for each adopted child.
  • The resident income tax rate has changed from 1.5% to 1.7%.
  • Datamart Query: Tax State = 18 County Code = 011
• County of Johnson:
  • The local income tax for Johnson, Indiana has changed effective October 1, 2022.
  • A new exemption has been added equal to $3,000 for each adopted child.
  • The resident income tax rate has changed from 1.2% to 1.4%.
  • Datamart Query: Tax State = 18 County Code = 081
• County of Knox:
  • The local income tax for Knox, Indiana has changed effective October 1, 2022.
  • A new exemption has been added equal to $3,000 for each adopted child.
  • The resident income tax rate has changed from 1.2% to 1.7%.
  • Datamart Query: Tax State = 18 County Code = 083
• County of LaPorte:
  • The local income tax for LaPorte, Indiana has changed effective October 1, 2022.
  • A new exemption has been added equal to $3,000 for each adopted child.
  • The resident income tax rate has changed from 0.95% to 1.45%.
  • Datamart Query: Tax State = 18 County Code = 091
• County of Monroe:
  • The local income tax for Monroe, Indiana has changed effective October 1, 2022.
  • A new exemption has been added equal to $3,000 for each adopted child.
  • The resident income tax rate has changed from 1.345% to 2.035%.
  • Datamart Query: Tax State = 18 County Code = 105
• County of Montgomery:
  • The local income tax for Monroe, Indiana has changed effective January 1, 2023
  • The resident income tax rate has changed from 2.1% to 2.65%.
  • Datamart Query: Tax State = 18 County Code = 107

• Kentucky Local Income Tax Withholding:
• Boone County:
  • The taxable wage base is increasing from $67,179 to $72,906.
  • The employee tax rate remains at 0.8%.
  • The maximum tax is $583.25.
  • Datamart Query: Tax State = 21 County Code = 015
• New York Local Income Tax Withholding:
• Yonkers:
  • The Single and Married tax tables have changed.
  • Datamart Query: Tax State = 36 County Code = 6820

You may execute Datamart queries to identify employees in affected taxing areas. For Combined File Ad-Hoc query/analysis of applicable States: add STE Tax State 1 = (State Code above) or STE Tax State 2 = (State Code above) to the filter or prompt lines. See above for the applicable Local Tax State and/or Local Tax City Codes to add to the prompt lines (Occurrences – Other PE Pay). 

The Interior Business Center (IBC) Payroll website is updated frequently; you may view the state tax formulas here:  http://www3.ibc.doi.gov/services/hr/payroll/payrolltopics/taxFormulas.cfm.

If there are any questions, please call the IBC Customer Support Center at 720-673-9958 (interim contact number) or by email at Payroll_Helpdesk@ios.doi.gov.

Resources:

• FPPS - Customer Central
  • User Group Messages - All
    • User Group Payroll Announcements
• User Group Distribution List changes: Please contact Lorraine Manzanares, Lorraine_M_Manzanares@ibc.doi.gov. All requests should come from an Agency User Group Representative.