All Nebraska employers are required to deduct state income tax from the paychecks of both resident and nonresident employees. Withholding may be based on wage bracket withholding tables or the percentage method tables provided by the Department of Revenue. If federal tax is calculated by annualized wages, average estimated wages, cumulative wages, or part-year employment methods, state taxes may be calculated in the same way.
The number of withholding allowances is determined from the federal Form W-4 filed by the employee. Employers may not accept different W-4s for federal and state purposes. Employees, however, may request additional state withholding in writing.
A flat rate of 5 percent is used to calculate withholding on supplemental wages and taxable awards that are subject to the 25 percent federal withholding rate.
Employers that employ 25 or more employees at any time during the year must withhold state income tax for each employee at the rate of at least 3 percent of gross wages, less tax-qualified deductions. The tax commissioner has set an alternate minimum level of acceptable withholding of 50 percent of the withholding table rate for a single person with one withholding allowance or of a married person with two allowances. If withholding is imposed at this level (or greater), there will be no imposition of any employer penalty. Withholding at a rate below these amounts is allowed if the employee provides satisfactory evidence to the employer that a lesser state withholding amount is not an attempt to evade applicable state taxes.
The withholding tables in the 2008 Nebraska Circular EN remain in effect. The nonshaded area indicates withholding of at least 3 percent, or ...