Ruling Request No. 96-03

Declaratory Rulings

Ruling Request No. 96-03

Re: Request for Declaratory Ruling Regarding Personal Income Tax Withholding on Amounts of Convenience Federal Withholding Requested by Employee

Request for Ruling

On behalf of your client, you request a declaratory ruling concerning the proper method for calculating Rhode Island personal income tax withholding on amounts of additional Federal income taxes withheld as requested by employees for convenience purposes.

Facts

Your client is "an employer maintaining an office...within this state and making payment of wages subject to Rhode Island personal income tax." Your client deducts and withholds from such wages for each payroll period a tax substantially equivalent to the tax reasonably estimated to be due resulting from the inclusion in the employee's Rhode Island income of his/her wages received during the calendar year. For the purposes of this ruling request, such withholding will be described as the "statutory withholding."

As part of each employee's for W-4, employees may, and have, elected to have additional amounts of Federal income taxes withheld [OVER AND ABOVE THE "STATUTORY WITHHOLDING"]. For the purposes of this ruling request, such withholding will be described as the "convenience withholding." Additionally, some employees who have elected "convenience withholding" for Federal purposes have elected NOT to have any "convenience withholding" for Rhode Island personal income taxes."

Ruling Requested

That given that the client's calculation and remittance of "statutory withholding" from its employees' wages is separate and apart from any "convenience withholding" election made by its employees for federal income taxes, such "convenience withholding" election, if made for federal purposes does not require that the client withhold Rhode Island personal income taxes calculated on the amounts of federal convenience withholding elected by the employee

Discussion

R.I.G.L. 44-30-71 reads in pertinent part as follows:

44-30-71. Requirement of withholding tax from wages.-- (a)General. Every employer maintaining an office or transacting business within this state and making payment of any wages subject to Rhode Island personal income tax to a resident or nonresident individual shall deduct and withhold from the wages for each payroll period a tax computed in such manner as to result, so far as practicable, in withholding from the employee's wages during each calendar year an amount substantially equivalent to the tax reasonably estimated to be due resulting from the inclusion in the employee's Rhode Island income of his or her wages received during the calendar year. The method of determining the amount to be withheld shall be prescribed by regulations of the tax administrator, with due regard to the withholding exemptions of the employee. (emphasis added)

(b) * * *

(1) * * *

(2) * * *

Regulation PIR 91-15 "Employers' Withholding" reads in pertinent part as follows:

III. COMPUTATION OF WITHHOLDING



A. Generally: An employer shall withhold using the current Rhode Island withholding rate which is set by the Tax Administrator and apply it to the amount currently being withheld from each employee's wages for Federal income tax purposes. (emphasis added)

R.I.G.L. 44-30-71, supra, authorizes the Tax Administrator to prescribe, by regulation, the method of determining the amount to be withheld. Regulation PIT 91-15 is clear and unequivocal in its requirement: The withholding rate is to be applied to the amount currently being withheld from the employee's wages for Federal income tax purposes. Therefore, in cases where the amount currently being withheld includes additional amounts over and beyond "statutory withholding" (as that term is described herein) the withholding rate applies to the entire amount being withheld for Federal purposes.

Ruling

In determining the amount of tax to be withheld from its employees' wages, the client shall apply the current Rhode Island withholding tax rate to the entire amount currently being withheld from each employees' wages for Federal income tax purposes.

R.Gary Clark

Tax Administrator



March 28, 1996