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 (DOR). If federal tax is calculated by the 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, unless the employer pays them at the same time as regular wages or chooses to combine them with regular wages for calculation purposes.
Special withholding procedures must be followed if the calculated result is less than 1.5 percent of the employee’s taxable wages. The withholding tables indicate which amounts meet the minimum withholding requirement, and which ones should not be used unless the employee provides substantiating documentation.
Documentation that an employer may accept to justify the lower withholding percentage may include verification of number of children/dependents, marital status, and level of itemized deductions.
An employer is subject to a penalty of up to $1,000 for each employee allowed to be under-withheld if the employee’s low withholding is not substantiated. An employee found to have intentionally claimed an excessive number of ...