Determining Income Tax Withholding on Wages Paid to A Nonresident

006.01 An employer must deduct and withhold Nebraska income tax from all wages paid to an employee who is a nonresident of Nebraska for services performed in Nebraska. The income tax withholding to be deducted is determined according to the methods in Reg-21-004. If the work of a nonresident employee is performed entirely in Nebraska, his or her employer must deduct and withhold income tax from all wages paid to the employee. Wages paid to a nonresident employee for work performed entirely outside of Nebraska are not subject to Nebraska income tax withholding. 006.02 If a nonresident employee works partly in and partly outside Nebraska, the employee may file a Nebraska Nonresident Employee Certificate for Allocation of Withholding Tax, Form 9N, with his or her employer so that the correct amount of Nebraska income tax withholding may be determined. This section does not apply to income tax withholding on gambling winnings, pensions and annuities, nonresidents performing personal services substantially in Nebraska, or persons or contractors receiving payments from another contractor for construction services performed in Nebraska. The requirements of Reg-21-004.05 through Reg-21.004.09 apply in these situations. 006.03 The employer may withhold Nebraska income tax on the basis of the apportionment shown by the nonresident employee on his or her Form 9N, but must make necessary adjustments during the year so that the proper amount of income tax is withheld and deducted from the employee's wages. For the purpose of making these adjustments, the portion of the employee's wages which is paid for work performed in Nebraska is determined as follows: 006.03A If the work is performed by a traveling sales representative, agent, or other employee whose pay is based directly on the volume of business transacted by him or her, the amount attributable to work in Nebraska is that portion of the wages received from business transacted by the employee in Nebraska bears to the total volume of business transacted. Example: Employee’s Nebraska sales = $1,000 Employee‘s total sales = $5,000 Nebraska portion of total sales = 20% Nebraska withholding on total from tables = $300 Multiplied by the Nebraska portion of total sales = 20% Nebraska income tax withholding = $60 006.03B For employees paid on an hourly basis, the amount of wages attributable to work in Nebraska is that portion of the total wages, which the total number of hours worked in Nebraska bears to the total number of hours worked. Example: Employee’s monthly Nebraska hours = 80 Employee‘s monthly total hours = 160 Nebraska portion of hours = 50% Nebraska withholding from tables = $300 Multiplied by the Nebraska portion of hours = 50% Nebraska income tax withholding = $150 006.03C For employees who are paid on a per-mile basis, the amount of wages attributable to work in Nebraska is that portion of the total wages, which the total number of miles traveled monthly in Nebraska bears to the total number of miles traveled monthly. Example: Employee’s monthly Nebraska mileage = 2,000 Employee‘s monthly total mileage = 10,000 Nebraska portion of mileage = 20% Nebraska withholding from tables = $300 Multiplied by Nebraska portion of mileage = 20% Nebraska income tax withholding = $60 006.03D For all other employees, the portion of wages attributable to work in Nebraska is that portion of the total wages paid for working days in Nebraska bears to the total wages paid, not counting nonworking days. Nonworking days means all days given off work, for example weekends, holidays, and days absent because of illness, personal injury, vacation, or leave with or without pay. Example: Employee days worked in Nebraska in the month = 10 Total employees days worked in the month = 20 Nebraska portion of the total days = 50% Nebraska withholding from tables = $300 Multiplied by the Nebraska portion of the days = 50% Nebraska income tax withholding = $150 006.03E The apportionment calculations and examples in this section do not apply to income tax withholding on gambling winnings, pensions and annuities, nonresidents performing personal services substantially in Nebraska, or persons or contractors receiving payments from another contractor for construction services performed in Nebraska. The requirements of Reg-21-004.05 through Reg-21.004.09 apply in these situations. 006.04 If an employee expects the portion of work performed in Nebraska to remain approximately the same as the prior year, the employee may compute the percentage of income applicable to the prior years' experience and use that percentage on the Form 9N. (Neb. Rev. Stat. §§ 77-2733 and 77-2753. October 26, 2014.)