Tax Segmentation – Bi-Weekly Employees
When UMBC faculty on bi-weekly payroll teach in summer or winter sessions, tax withholding on the “lump sum” payment is calculated using a process we call Tax Segmentation. This is a modified withholding calculation which annualizes the lump sum payment prior to calculating withholding. This makes the tax withholdings on the paycheck that includes the summer or winter session salary be closer to the amount the employee will actually pay in income tax.
Winter Session
Faculty who are already on bi-weekly payroll and who teach in winter session are typically eligible for tax segmentation.
Summer Session
In summer session, only faculty members who receive a bi-weekly paycheck on the date that summer salaries are paid are eligible for tax segmentation. Faculty should review their contracts and confirm their final bi-weekly pay date to determine if they are eligible for summer tax segmentation. The Division of Professional Studies Payroll office is NOT able to confirm bi-weekly pay dates for payments coming from other departments.
Withholding Options for Faculty who are NOT on Bi-weekly Payroll
W-4 Adjustment
Faculty not on bi-weekly payroll who receive a one-time lump sum paycheck when teaching in summer or winter sessions can adjust the W-4 form in advance to reduce the amount of taxes withheld. You can update your W-4 via Payroll Online Service Center (POSC).
The State of Maryland also provides an online “Net Pay Calculator” that can be used to project deductions and taxes which will be withheld from a paycheck.
Questions or Assistance
Faculty who have questions or need additional assistance regarding summer or winter session payroll should contact the Division of Professional Studies (DPS) Payroll office at 410/455-2297. Please keep in mind that UMBC cannot provide individuals with tax advice or recommendations. Consult your tax advisor if you have questions regarding payroll deductions or your individual tax situation.
Income Tax Withholding FAQs
OSWSP and DPS Payroll team members are not tax advisors and are unable to provide individual tax advice. However, common FAQ’s are provided below, based on prior inquiries from faculty.
Q: My salary for teaching a special sessions class had more federal income tax withheld than I expected. Why did that happen?
There are several potential reasons this could occur:
- You have updated your W-4 to have additional withholding. Check your current W-4 via the State of Maryland Payroll Online Service Center (POSC). Information about the W-4 is available on the UMBC HR website. If you have a bi-weekly wage in addition to your special sessions class salary, your additional withholding may be higher than expected.
- Your summer or winter salary increased your total annual salary projection to a higher withholding bracket. The IRS has resources to help you. Publication 5050, Tax Withholding and Estimated Tax as well as the Tax Withholding Estimator are available.
- If your special session salary is added to a standard paycheck without any other bi-weekly payment, tax segmentation cannot happen. In this case, the withholding calculation required by the IRS will likely result in a higher than expected withholding. If total calendar year withholding is higher than the faculty member actually owes on the annual tax return, a refund will occur when the annual income tax return is filed the following winter/spring.
Q: What can I do if the taxes withheld are more than I expected?
Unfortunately, once taxes have been withheld, UMBC is unable to alter or refund the amount. You can update your W-4 via Payroll Online Service Center (POSC) to lower the withholding on future paychecks from UMBC. Use the Tax Withholding Estimator to guide revision of the W-4 and decrease the tax amount withheld. According to Central Payroll, this adjustment can be made up until 6 business days prior to the check issuance. Summer pay dates are dependent on the session you are teaching in and are listed on your summer contract.
Q: What if I think higher than expected withholding is going to happen in the future? Can I avoid it?
Due to the concentrated nature of the special sessions, faculty are compensated in a “lump sum” payment. Since that one-time payment is not subdivided over multiple pay periods, the tax withholding on the one-time payment may result in a rate higher than expected. By anticipating this potential situation, you may determine that one of the following would help:
- Update your W-4 via Payroll Online Service Center (POSC) at least 6 business days prior to the date you will be paid. Use the Tax Withholding Estimator to guide your revision of your W-4 online.
- Use the State of Maryland Central Payroll Bureau Net Pay Calculator to project your tax withholding.
Net Pay Calculator Directions: You’ll need your current W-4 information and your most recent pay stub.
The Net Pay Calculator requires quite a few pieces of information to give you the best results. You should have your current W-4 and most recent pay stub available when you complete the Calculator.
“*Regular Pay” is your regular bi-weekly wage.
“Adjustment to Pay” is your special sessions salary (consult your contract for pay dates and amounts).
Enter the remaining information requested using your W-4 and pay stub.
“Segmentations (CPB Use), Number of Segments” allows you to see how tax segmentation will work (you must have “regular pay” for this to be applicable!). Calculate the tax segmentation number by using this formula: (regular pay + adjustment to pay)/bi-weekly. Round that number and enter in the “Segmentations (CPB Use), Number of Segments” box.
If you will NOT receive a UMBC regular bi-weekly wage on the same pay date that you are paid for a special sessions course, do NOT enter a number into “Segmentations (CPB Use), Number of Segments”.
Q: How can I get my tax questions answered?
Contact your regular tax advisor. Additionally, you can contact the IRS at 1-800-829-1040.
If you need assistance accessing POSC, contact Maryland Central Payroll Bureau at POSCHelp@marylandtaxes.gov.