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.
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.
Nebraska, unlike the federal Internal Revenue Service (IRS), still allows employees to claim personal exemption credits. Therefore, an employee who completes federal W-4 after January 1, 2020, must also complete state Form W-4N to determine the number of Nebraska allowances. If the employee does not do so, the employer must withhold as if the employee were single and claimed no withholding allowances regardless of marital status. On the other hand, if an employee’s pre-2020 federal Form W-4 is still in effect, the employer may continue to use that for Nebraska withholding purposes.
Form W-4N is also used if an employee wishes to claim exemption from withholding or, conversely, to request additional state withholding.
For employers of 25 or more employees, 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 ...