N.Y. Comp. Codes R. & Regs. tit. 20 § 171.8

Current through Register Vol. 46, No. 25, June 18, 2024

Section 171.8 - Exemption from withholding of New York State personal income tax for certain employees incurring no New York State personal income tax liability

Tax Law, § 671(a)(3)

(a) An employer need not deduct and withhold any New York State personal income tax from a payment of wages made to an employee, provided:

(1) the employee furnishes the employer with a completed Certificate of Exemption from Withholding, form IT-2104E (an Employee's Withholding Allowance Certificate, form IT-2104, may not be used) certifying that the employee qualifies for exemption from withholding of New York State personal income tax on the ground that the employee is exempt from withholding of New York State personal income tax under paragraph (3) of subsection (a) of section 671 of the Tax Law (see subdivision [b] of this section); and

(2) such exemption certificate is in effect.

The exemption from withholding certificate is not in effect if it has expired, has been revoked by the employee or has been required to be revoked by the employer. If the employee files his New York State personal income tax return on a calendar-year basis, the exemption from withholding certificate expires on the 30th day of April of the next year. If the employee files his New York State personal income tax return on a fiscal-year basis, the exemption from withholding certificate expires on the last day of the fourth month following the close of the taxable year.

(b)

(1) An employee qualifies for exemption from withholding of New York State personal income tax under paragraph (3) of subsection (a) of section 671 of the Tax Law with respect to a taxable year if:

(i) the employee (a) is under 18 years of age, or (b) is under 25 years of age and a full-time student, or (c) is over 65 years of age; and

(ii) the employee had no New York State income tax liability in the prior taxable year and can reasonably anticipate none in the current taxable year.

An employee incurs New York State income tax liability if his joint or separate New York State personal income tax return shows any New York State income tax before the allowance of any credit for New York State personal income tax withheld. A full-time student is one who meets the requirements of subsection (b) of section 1.151 -3 of the Federal income tax regulations.

(2) An employee who qualifies for exemption from withholding of New York State personal income tax on the grounds set forth in this subdivision must revoke the exemption from withholding certificate:

(i) within 10 days from the day such employee can reasonably expect to incur New York income tax liability for the current taxable year; or

(ii)

(a) if the employee is on a calendar-year basis, on or before December first, effective January first of the next taxable year, if such employee can reasonably expect to incur New York State income tax liability for the next taxable year, or

(b) if the employee is on a fiscal-year basis, on or before the first day of the last month of the current taxable year, effective on the first day of the next taxable year.

(3) An employer must revoke the exemption from withholding certificate within 10 days from the date that the date of birth stated on the exemption from withholding certificate furnished by the employee indicates that the employee no longer meets the age requirements for exemption from withholding under this subdivision. The revocation must be made by written notice to the employee.

(c)Submission of certain Certificates of Exemption from Withholding (forms IT-2104E).

(1) General rule.

An employer shall submit, in accordance with paragraph (2) of this subdivision, a copy of any Certificate of Exemption from Withholding (form IT-2104E), together with a copy of any written statement received from the employee in support of the claims made on the certificate, which is received from the employee during a reporting period, except for the first submission under subparagraph (2)(iii) of this subdivision, if the employee is employed by that employer on the last day of the reporting period and if the employer reasonably expects, at the time the certificate is received, that the employee's wages from that employer shall usually exceed $200 per week.

(2) Rules for submission.

(i) In general.

(a) For purposes of this subdivision, a reporting period is a calendar quarter (i.e., January through March, April through June, July through September, and October through December).

(b) When to submit. Copies of Certificates of Exemption from Withholding (forms IT-2104E) required to be submitted under paragraph (1) of this subdivision are to be submitted as follows:

Reporting period	Due date
January through March	April 30th
April through June	July 31st
July through September	October 31st
October through December	January 31st

(c) Where to submit. An employer is to submit copies of Certificates of Exemption from Withholding (forms IT-2104E) required to be submitted under paragraph (1) of this subdivision to the New York State Department of Taxation and Finance, Income Tax Audit Administrator Withholding Certificate Coordinator, Building 9, W.A. Harriman Campus, Albany, NY 12227, and must include with the submission a statement showing the employer's name, address, employer identification number, and the number of copies of Certificates of Exemption from Withholding (forms IT-2104E) being submitted.

(ii) Option. At the option of the employer, copies of Certificates of Exemption from Withholding (forms IT-2104E) required to be submitted under paragraph (1) of this subdivision may be submitted earlier and for shorter reporting periods. In such case, the employer is to submit the copies of the Certificates of Exemption from Withholding(forms IT-2104E) to the New York State Department of Taxation and Finance, Income Tax Audit Administrator Withholding Certificate Coordinator, Building 9, W.A. Harriman Campus, Albany, NY 12227, and must include with the submission a statement showing the employer's name, address, employer identification number, and the number of copies of Certificates of Exemption from Withholding (forms IT-2104E) submitted. However, a copy of a Certificate of Exemption from Withholding (form IT-2104E) required to be submitted under paragraph (1) of this subdivision must be submitted no later than the time prescribed by clause (i)(b) of this paragraph.

(iii) First submission. The first submission of copies of Certificates of Exemption from Withholding (forms IT-2104E) required to be submitted under paragraph (1) of this subdivision shall be due July 31, 1987 and shall be applicable to certificates in effect during the first and second reporting periods of 1987.

(3) Other Certificates of Exemption from Withholding (forms IT-2104E).

An employer is also required to submit a copy of any Certificates of Exemption from Withholding (forms IT-2104E) in effect or make the original certificate available for inspection, together with a copy of any written statement received from the employee in support of the claims made on the certificate, upon written request of the Department of Taxation and Finance. This request of the Department of Taxation and Finance may relate either to one or more named employees or to one or more reasonably segregable units of the employer.

(4) Computation of New York State personal income tax to be withheld.

(i) Until receipt of written notice from the Department of Taxation and Finance that a Certificate of Exemption from Withholding (form IT-2104E) which has been submitted in accordance with this subdivision is defective, that certificate shall remain in effect and the employer shall withhold on the basis of the statements made in such certificate.

(ii) The Department of Taxation and Finance may find that a copy of a Certificate of Exemption from Withholding (form IT-2104E) which has been submitted contains a materially incorrect statement, or it may determine, after written request to the employee for verification of the statements on the certificate, that the certificate lacks sufficient information to determine if the certificate is correct. If the Department of Taxation and Finance so finds or determines, and notifies the employer in writing that the certificate is defective, the employer must then consider the Certificate of Exemption from Withholding (form IT-2104E) to be defective for purposes of computing the amount of New York State personal income tax to be withheld.

(iii) If the Department of Taxation and Finance notifies the employer that a Certificate of Exemption from Withholding (form IT-2104E) is defective, the Department of Taxation and Finance will, based on its findings, advise the employer that the employee is not entitled to claim exemption from withholding and will advise the employer as to the maximum withholding exemptions the employee is entitled to claim.

(iv) The Department of Taxation and Finance will provide the employer with a copy for the employee of each notice it furnishes to the employer under this paragraph, in addition to the notice furnished to the employer for such employer's own use. The Department of Taxation and Finance shall also mail a similar notice to the employee at the address of the employee as shown on the Certificate of Exemption from Withholding (form IT-2104E) under review.

(v) The employer shall promptly furnish the employee who filed the defective Certificate of Exemption from Withholding (form IT-2104E), if still in such employer's employ, with a copy of the written notice of the Department of Taxation and Finance with respect to the certificate and may request an Employee's Withholding Allowance Certificate (form IT-2104) from the employee. The employer must withhold amounts of New York State personal income tax from the employee on the basis of the maximum number specified in the written notice received from the Department of Taxation and Finance.

(vi) If and when the employee does file a new Employee's Withholding Allowance Certificate (form IT-2104), after an earlier Certificate of Exemption from Withholding (form IT-2104E) was considered to be defective, the employer shall withhold on the basis of that new certificate (whenever filed) as currently effective only if the new certificate does not make a claim of a number of withholding exemptions, which claim is greater than the number earlier furnished by the Department of Taxation and Finance in its written notice to the employer. If the new certificate does make a claim which is greater than the number contained in the Department of Taxation and Finance's written notice to the employer, then the employer shall disregard the new Employee's Withholding Allowance Certificate (form IT-2104), shall not submit that new certificate to the Department of Taxation and Finance, and shall continue to withhold amounts of New York State personal income tax from the employee on the basis of the maximum number specified in the written notice received from the Department of Taxation and Finance.

(vii) If the employee files a new Certificate of Exemption from Withholding (form IT-2104E) or files a new Employee's Withholding Allowance Certificate (form IT-2104) and makes a claim of a number of withholding exemptions on such certificate that is greater than the number contained in the Department of Taxation and Finance's written notice to the employer, the employee may specify on such new certificate, or by a written statement attached to that certificate, any circumstances of the employee which have changed since the date of the Department of Taxation and Finance's earlier written notice, or any other circumstances or reasons, as justification or support for the claims made by the employee on the new Certificate of Exemption from Withholding (form IT-2104E) or the new Employee's Withholding Allowance Certificate (form IT-2104). The employee may then submit the new Certificate of Exemption from Withholding (form IT-2104E) or the new Employee's Withholding Allowance Certificate (form IT-2104) either to (a) the New York State Department of Taxation and Finance, Income Tax Audit Administrator Withholding Certificate Coordinator, Building 9, W. A. Harriman Campus, Albany, NY 12227, or to ( b) the employer, who must then submit a copy of that new certificate and the employee's written statement (if any) to the Department of Taxation and Finance. The employer shall continue to disregard that new certificate and shall continue to withhold amounts of New York State personal income tax from the employee on the basis of the maximum number specified in the written notice received from the Department of Taxation and Finance unless and until the Department of Taxation and Finance by written notice advises the employer to withhold amounts of New York State personal income tax on the basis of the new Certificate of Exemption from Withholding (form IT-2104E) or Employee's Withholding Allowance Certificate (form IT-2104) and revokes its earlier written notice.

(viii) For purposes of this subdivision, the term employer includes anyone who is authorized by the employer to receive Certificates of Exemption from Withholding (forms IT-2104E), to make withholding computations, or to make payroll distributions.

(d) The provisions of this section shall also be applicable in determining exemption from withholding for purposes of the City of New York personal income tax on residents of the City of New York and the City of Yonkers income tax surcharge on residents of the City of Yonkers.

(e) Penalties.

(1) Penalties that may be applicable to employers for failure to comply with the provisions of this section include, but are not limited to, the penalties imposed pursuant to sections 685(g), 685(i), 1801(a) and 1806 of the Tax Law.

(2) Penalties that may be applicable to employees for making a statement under section 671 of the Tax Law which results in a decrease in the amounts of New York State personal income tax deducted and withheld or for failure to supply information with respect to claiming exemption from withholding include, but are not limited to, the penalties imposed pursuant to sections 685(i), 685(s), 1801(a) and 1804(a) of the Tax Law.

N.Y. Comp. Codes R. & Regs. Tit. 20 § 171.8