The University is required to withhold Federal, State, and in some cases St. Louis City taxes from your earnings. Taxes are withheld at the time income is earned or received during the year and the University remits them to the appropriate taxing authority.
Federal Income Tax
The amount of federal income tax withheld from your paycheck is based on elections that you make on Federal Form W-4 (Employee Withholding Allowance Certificate). This form is used by US citizens and resident aliens. You can review and update your elections anytime by signing into Workday and going to the Pay worklet.
Many tools are available to help you understand the impact of W-4 elections that you make. PaycheckCity is a popular website.
Federal FICA Tax
FICA tax is comprised of two components:
- Social Security taxes are assessed at a rate of 6.2% of earnings up to a maximum wage base that changes annually. To see the calendar year maximum wage base go to Employee Self Service | Payroll and Compensation | Tax Info and Paycheck Calc.
- Medicare taxes are assessed at a rate of 1.45% of earnings. The maximum wage base does not apply to Medicare taxes.
Students may be eligible for exemption for this tax. For more information, see Student FICA Exemption at the bottom of this page.
Missouri Income Tax
Individuals who work in Missouri are required to pay Missouri state income tax regardless of your home state. The amount of Missouri income tax withheld from your paycheck is based on elections that you make on Missouri Form MO W-4. You can review and update your elections anytime by signing into Workday and going to the Pay worklet. If you have an approved telecommuting agreement authorizing you to work in another state, those can also be viewed and updated in Workday
St. Louis City Earnings Tax
The City of St. Louis imposes an earnings tax of 1% on the following:
- Salaries, wages, commissions and other compensation earned by resident individuals of the City.
- Salaries, wages, commission and other compensation earned by nonresident individuals of the City for work done or services performed or rendered in the City.
The University is required to withhold this tax from your paycheck and remit directly to the City of St. Louis.
Individuals who are not a St. Louis City resident and work both within and outside of the City of St. Louis are eligible for partial exemption if they can demonstrate that a percentage of their wages for services are performed outside the City of St. Louis. Individuals who meet this criteria must complete the city tax form to claim partial exemption.
St. Louis City Earnings Tax and Remote Work
The City of St. Louis imposes a 1% earnings tax on salaries, wages, commissions, and other compensation earned by resident individuals of the City and by nonresident individuals of the City for work done or services performed or rendered in the City. Employers doing business within the City are required to withhold the earnings tax and remit to the City on the employee’s behalf.
Nonresident employees of the City have always been able to file a St. Louis City tax return on which they may request a refund for any whole days worked outside of the City for which their employer withheld. The process by which a refund is requested is provided in the instructions to the St. Louis City tax return, Form E-1. Those instructions read:
Non-residency deduction claims must be supported by a signed letter from your employer on official letterhead, stating whole days worked outside the City during the year. Failure to provide this documentation will result in the disallowance of the deduction.
As a result of the COVID-19 pandemic, employees were permitted and, in some cases required, to work remotely/virtually. In many cases, those employees performed their job duties at locations outside of the City of St. Louis.
Under rules issued by the City of St. Louis Collector of Revenue, remote/virtual work “should be treated as working at [the employee’s] original principal place of work.” On the issue of earnings tax, the City issued a statement asserting that remote work conducted for employers located in the City was a deliberate accommodation to maintain St. Louis City businesses and, therefore, associated wages remained subject to the earnings tax. The statement included the following:
If you live outside of the city limits and your employer continues to operate within the city limits, you will be required to pay the earnings tax even if your employer permits you to work virtually.
As we have allowed in the past, if your place of employment is in the city and you are required to travel for business outside of the city to meet customers, clients, etc., those days can be deducted from your earnings tax calculation with the E1-R form with proper documentation. However, if your place of employment remains in the City while you are working virtually, you will be required to pay the tax.
As a result, the university is required to continue withholding city earnings tax for employees based at work locations within the city limits.
Many nonresident employees that have worked remotely from their residences outside of the City limits have requested a signed letter from the university stating that the employee has worked outside the City during their remote work arrangement. As a result of the City’s position that the employer letter must certify whole days worked outside of the City excluding days worked remotely/virtually, the university is unable to issue employer letters that satisfy the City’s “proper documentation” requirements.
If you have additional questions about the application of the St. Louis City Earnings Tax, please contact your tax advisor.