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Frequently Asked Questions
About Nebraska Income Tax Withholding

General Questions  |  Special 1½% Withholding Procedures 
 E-Filing Forms W-2 and 1099  |  E-Filing Form W-3N  |  E-Filing Form 941N

The Department is not issuing a new Circular EN for 2014. Employers should continue to use the 2013 Nebraska Circular EN.

The rates and brackets for withholding on wages have not changed since issuance of the 2013 Circular EN.


General Questions

If I have employees, who do I need to contact?

If I have employees, how do I file state withholding?

What are the state income tax withholding rates?

What state form is equivalent to the Federal Form W-4?

What do I do if one of my employees wants additional state income tax withheld?

How does an employer submit a Form 1099-MISC and other 1099 forms to the state?

If I am an employer located in another state, but have employees in Nebraska from time to time, are their wages subject to Nebraska withholding when they are working in Nebraska?


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Special 1½% Withholding Procedures

How is the number of employees determined when there is employee turnover during the year in my business?

Do the LB 223 special withholding procedures include state withholding on my pension or annuity?

How do I know what amount to withholding on, and what are tax qualified deductions?

I don't have the extra time to interview so many of my employees. Without obtaining documentation from my employees, must I withhold at the 1½% level indicated in your notice?

Must I keep the documentation provided by my employees (birth certificates, mortgage payments, etc.) in my payroll files?

If an employee can not document the number of allowances on the Federal W-4 and the documentation supports a lesser number, which number of allowances should be used for Nebraska withholding purposes?

If an employee does not provide any documentation, may the employer withhold for Nebraska purposes at the single, zero allowance level, even though this may be greater than 1½%?

Since the percentage method of calculations do not show the non-shaded and shaded areas like the payroll period tables, how will I know the equivalent withholding values as shown in the payroll period tables if I use the percentage method?

Will I be subject to the $1,000 penalty if any of my employees have to pay in (have too little withheld) at the end of the year?

How is this procedure handled for employees who earn tips?


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E-filing Forms W-2 and 1099

Is it possible to e-file Forms W-2, W-2G, 1099-MISC, or 1099R for prior tax years?

Are all employers required to e-file?

Are employers with fewer than 50 Form W-2 and 1099 statements able to e-file Form W-2 data to the Nebraska Department of Revenue?

What is the due date for electronic filing?

Is the Form 4419 (Application for Computer Reporting) required?

Is the RV state record total required?

Do I need an ID number and Personal Identification Number (PIN) to use e-file for filing W-2s?

What if I can't find my ID number and PIN?

What contact information is requested?

Can Forms W-2 and 1099 be filed by a payroll company or third party using the bulk filing method?

Is reporting multiple companies in one file possible?

What file format must be used to submit my W-2 file?

What file format must be used to submit my 1099s?

Will Nebraska accept PDF or CSV files?

Is data transmitted over the Internet encrypted and protected?

Is it possible to upload W-2 and 1099 files?

Can files larger than 50MB be accepted?

Are password-protected files accepted?

How do I confirm that the Nebraska Department of Revenue has received my file?

Is there a way to enter individual W-2s through your website?


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E-filing Form W-3N, Nebraska Reconciliation of Income Tax Withheld

Can I file my Form W-3N electronically?

What is the due date for e-filing my W-3N?

When can I file my return?

Is it possible to e-file Form W-3N for prior tax years?

Do I need an ID number and PIN to e-file my Form W-3N?

What if I can't find my ID number and PIN?

How do I access the online system to file my Form W-3N?

My fourth quarter payment is not shown on my return. Can I enter this payment online?

How do I pay a balance due?

How do I know the Nebraska Department of Revenue has received my W-3N?

Do I need to send in a paper return when filing via the Internet?

If I enter an incorrect amount on my Form W-3N, how do I correct my error?

Will I continue to receive my W-3N in the mail?

Can I e-file if I am an annual filer?

I file Forms W-3N for more than one company. Can I e-file all at one time?


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E-filing Form 941N, Nebraska Withholding Return

Do I need to register to e-file my Form 941N?

When can I file my return?

How do I remit payment for the return that I e-file?

Do I need to send in a paper return if I e-file?

Can I e-file amended returns?

Will I continue to receive my Form 941N in the mail?

When is the information I enter actually transmitted to the Department of Revenue?

Can I e-file my Form 501N?

How long will the PDF of my return be available?

Can I e-file if I am an annual filer?


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Further Questions?
Contact Nebraska Taxpayer Assistance
at 800-742-7474 (NE & IA) or 402-471-5729

General Questions

If I have employees, who do I need to contact?
If I have employees, how do I file state withholding?
First, you need to apply for a Nebraska withholding number on the Nebraska Tax Application, Form 20, prior to withholding state taxes from your employees. You will be mailed a Nebraska Withholding Certificate with your state identification number on it.

If you have a payroll service do your payroll, you are still responsible for filing this application before they can start any payroll activity. You should provide them with a copy of the Nebraska Withholding Certificate showing your state identification number and business name. This will allow them to prepare the returns they file for you with the correct Nebraska identification number. They are not authorized to file any returns for a Nebraska employer until they have received a Nebraska withholding identification number.

The Nebraska Circular EN has much more detailed information on Nebraska withholding.

What are the state income tax withholding rates?
The rates, brackets, withholding allowance value, special withholding procedures, and withholding tables on wages are located in the 2013 Nebraska Circular EN.
What state form is equivalent to the Federal Form W-4?
Nebraska does not have a state equivalent to this form. Withholding allowances are the same number as the employee claims on his or her Federal Form W-4. The value of the Nebraska allowance is listed in the Nebraska Circular EN.
What do I do if one of my employees wants additional state income tax withheld?
When an employee wants additional state income tax to be withheld, he or she should complete a written statement to the employer requesting the amount to be withheld.
How does an employer submit a Form 1099-MISC and other 1099 forms to the state?
Nebraska does not require employers to submit Form 1099-MISC or other 1099 forms to the Department unless Nebraska state income tax withheld is to be reported. When Nebraska tax is withheld, the 1099 forms are submitted to the Department with the Nebraska Reconciliation of Income Tax Withheld, Form W-3N.
If I am an employer located in another state, but have employees in Nebraska from time to time, are their wages subject to Nebraska withholding when they are working in Nebraska?
Yes. The wages paid to employees for work done in Nebraska is subject to Nebraska withholding. The only exceptions to this rule are wages paid to railroad crews, airline flight crews, and interstate truck drivers.

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Special 1½% Withholding Procedures

How is the number of employees determined when there is employee turnover during the year in my business?

Based on similar federal standards, if you employ 25 or more employees at any one time during the year, you are subject to the special withholding procedures. It does not matter how many W-2s are actually issued during the tax year.

Do the LB 223 special withholding procedures include state withholding on my pension or annuity?
No, the special withholding procedures do not apply to any pension or annuity payments.  While pension and annuity payments may be deemed “wages subject to withholding” under both federal and state law, the special 1½% withholding procedures apply only to wages and salaries paid to active employees by their employer.
How do I know what amount to withholding on, and what are tax qualified deductions?
Generally, the special 1½% withholding will be applied to an employee’s taxable wages. The term “tax qualified deductions” is not currently defined in either Federal or State law. Therefore, the Tax Commissioner has administratively defined tax qualified deductions to include tax-deferred compensation, and other tax-sheltered items (cafeteria plan benefits such as health insurance, retirement, medical and dependent care reimbursement, etc.).
I don't have the extra time to interview so many of my employees. Without obtaining documentation from my employees, must I withhold at the 1½% level indicated in your notice?

The law specifies a withholding rate of 1½%. However, the Tax Commissioner has set a threshold of 50% of a single person with one withholding allowance, or a married person with two allowances, as a minimum level of acceptable withholding. If withholding is imposed at this level (or greater), there will be no imposition of any employer penalty. You can also withhold an amount within the non-shaded area of the withholding tables which may include: reducing the number of withholding allowances, or using the Percentage Method Tables to calculate at least 50% of the withholding for a single employee with one allowance or at least 50% of the withholding for a married employee with two allowances. This should result in a lower, but still adequate, withholding amount rather than calculating the withholding at the 1½% level.

The law change included language indicating its purpose was to insure that an employee was not attempting to improperly or fraudulently avoid paying the proper amount of income tax. The Department has determined that if the withholding is set at an amount which is at least 50% of the “Single filing, one allowance” column or the “Married with two allowances” column, then the employee is not attempting to “fraudulently evade or defeat” the income tax system. This also preserves the due process rights of employees in seeking to establish a lesser amount of acceptable withholding.

For instance, in the Married Biweekly withholding chart (a portion of which is reproduced below) assume an employee making $515 during the biweekly period has claimed 3 withholding allowances. The withholding from the withholding table for 3 allowances is $1.55. This amount  falls within the shaded area of the table for the $500-520 bracket and requires use of the special withholding procedures. Calculating the withholding at 1½% would result in a withholding amount of $7.73 [$515 X .015], almost 5 times the amount originally determined. Reducing the number of withholding allowances to 2 (for state purposes only) would set the withholding amount at $3.23, which falls within the non-shaded area of the table. Using the Percentage Method Table, withholding would be calculated at 50% of the withholding for two allowances.

Married, Bi-weekly

Must I keep the documentation provided by my employees (birth certificates, mortgage payments, etc.) in my payroll files?
No, it is not necessary to keep such detailed or private information in the payroll files.  Instead, you can develop a summary document that includes a statement signed by the employee that the employee’s Form W-4 allowances have been reviewed and have been determined to be reasonable.  A sample copy of this type of summary document is included in the link below.

Employer Letter to Employees Regarding Special Withholding Procedures and Documentation Worksheet
(Employers Note: You may print this document and photocopy for your own use)

The following is a potential (but not complete) CHECKLIST for “adequate supporting documentation”:

  • Mortgage interest – bank/mortgage firm year-end statement
  • Property tax on home- property tax statement from county treasurer (may be available online as public information)
  • State income tax information – payroll statements or past Federal Forms W-2. 
  • Charitable Contributions - receipts from the employee's church or other charitable organizations 
  • # of Dependents - social security cards, school registration, baptismal records

In addition, if the employer has benefits information in personnel or other records for the employee such as medical insurance with the number of dependents noted, this information may also be used.

If an employee can not document the number of allowances on the Federal W-4 and the documentation supports a lesser number, which number of allowances should be used for Nebraska withholding purposes?
The law specifies a withholding rate of 1½%. However, the Tax Commissioner has set a threshold of 50% of a single person with one withholding allowance, or a married person with two allowances, as a minimum level of acceptable withholding. If withholding is imposed at this level (or greater), there will be no imposition of any employer penalty.
If an employee does not provide any documentation, may the employer withhold for Nebraska purposes at the single, zero allowance level, even though this may be greater than 1½%?
The law specifies a withholding rate of 1½%. However, the Tax Commissioner has set a threshold of 50% of a single person with one withholding allowance, or a married person with two allowances, as a minimum level of acceptable withholding. If withholding is imposed at this level (or greater), there will be no imposition of any employer penalty. Thus, the single, zero withholding level is not necessarily recommended, as it may result in a substantial over withholding amount. Rather, you can set the withholding rate to a higher allowance number that will put the withholding into the non-shaded area of the withholding tables. Also see the answers above.
Since the percentage method of calculations do not show the non-shaded and shaded areas like the payroll period tables, how will I know the equivalent withholding values as shown in the payroll period tables if I use the percentage method?
Employers using the percentage method must compare the percentage method results with the payroll period tables to see if the calculated withholding percentage falls within the non-shaded or shaded areas. The law specifies a withholding rate of 1½%. However, if the percentage method results fall within the required minimum acceptable withholding amounts as determined by the Tax Commissioner (non-shaded area), you may use the percentage method withholding amount without fear of incurring any employer penalty.

If the percentage method results fall below the required minimum withholding amounts (shaded area), then the special withholding procedure must be used. You may accept documentation from the employee which justifies state withholding below the required minimum amount. If documentation is not received, then withholding must be calculated at some level within the non-shaded area of the payroll period tables — either 1½% of gross wages, less tax-qualified deductions; or, if single, at 50% of the withholding for a Single employee with one allowance; or, if married, at 50% of the withholding for a Married employee with two allowances.

Will I be subject to the $1,000 penalty if any of my employees have to pay in (have too little withheld) at the end of the year?
Because withholding is an estimate of tax liability, and changes in wages or other circumstances can affect the withholding amount, the Department would not use the year-end withholding against gross wages less qualified deductions as a threshold.

The Tax Commissioner may impose a penalty upon an employer who fails to either (a) withhold at least 1½% of the wages of any employee, or (b) obtain satisfactory evidence from the employee justifying a lower withholding amount as required by subdivision (1)(b) of Section 77-2753.

How is this procedure handled for employees who earn tips?
If the employer is considering tips as wages, the tips will be subject to the same withholding requirements as all other wages being paid.

According to Section 77-2753(5), "Wages and other payments subject to withholding shall mean payments that are subject to withholding under the Internal Revenue Code of 1986 and are (a) payments made by employers to employees, except such payments subject to 26 U.S.C. 3406, (b) payments of gambling winnings, or (c) pension or annuity payments when the recipient has requested the payor to withhold from such payments."


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E-filing Forms W-2 and 1099

Is it possible to e-file Forms W-2, W-2G, 1099-MISC, or 1099R for prior tax years?
Yes. You may e-file current and prior year Forms W-2, W-2G, 1099-MISC, or 1099R.
Are all employers required to e-file?
Forms W-2 and 1099 must be e-filed when an employer has over 50 Forms W-2, 1099-MISC, 1099-R, or W-2G to report.
Are employers with fewer than 50 Form W-2 and 1099 statements able to e-file Form W-2 data to the Nebraska Department of Revenue?
Yes. All employers are encouraged to e-file withholding forms, even when not required.
What is the due date for electronic filing?
All W-2 and 1099 information must be reported on or before February 1st of the year following the reporting period. If February 1st falls on a weekend or holiday, the due date is extended to the next business day.
Is the Form 4419 (Application for Computer Reporting) required?

No. The Form 4419N requirement has been eliminated.

Is the RV state record total required?
Yes. Your W-2 file must contain the RV record. This record contains the State record totals.
Do I need an ID number and Personal Identification Number (PIN) to use e-file for filing W-2s?

Yes. Your identification number is found in the upper left-hand corner of your Form W-3N. Don't include the "21-" or preceding "0s". Your password (PIN) is the 5-digit number printed on your Form W-3N. You must enter your ID number and PIN to file over the internet.

What if I can't find my ID number and PIN?
Please contact the Nebraska Department of Revenue for your ID number and PIN.
What contact information is requested?
You will be required to supply the contact person's first name, last name, email address, and phone number.
Can Forms W-2 and 1099 be filed by a payroll company or third party using the bulk filing method?
Yes. Payroll companies and other third parties filing Forms W-2 and Forms 1099 for multiple taxpayers
(bulk filing) may contact the Department to receive an ID and PIN that will give them access to the online filing program. To receive the ID and PIN, contact Taxpayer Assistance at 800-742-7474 (NE and IA) or
402-471-5729.
Is reporting multiple companies in one file possible?

Yes. You may include multiple companies in one file. Make certain the data file submitted conforms to the proper format and includes all required records.

What file format must be used to submit my W-2 file?

Nebraska only accepts Social Security Administrations EFW2 (Publication 42-007) file format. The EFW2 file format is a fixed 512 record length record. W-2 records must be exactly 512 characters long. Do not send other document formats. All files must contain the RA, RE, RW, and RS31 records. Please review Social Security Administration Publication No. 42-007 EFW2 Tax Year 2013 for more information regarding file formats. Make sure that each data file submitted is complete (RA through RF Records). If your software does not allow you to create a file formatted as required if Publication 42-007, review our instructions for using the Department’s W-2 File Creator if your software does not create a file mentioned above.

What file format must be used to submit my 1099s?

Nebraska only accepts the federal formats and guidelines specified in IRS Publication 1220.

Will Nebraska accept PDF or CSV files?

Nebraska will not accept PDF or CSV W-2 or 1099 files. All magnetic media will not be processed. This includes diskettes and CDR media. The Department will accept paper W-2s and 1099s.

Is data transmitted over the Internet encrypted and protected?

The W-2 file is posted via HTTPS to a web server and the data is protected with SSL level 3 256-bit encryption.

Is it possible to upload W-2 and 1099 files?

You will be able to send both W-2 and 1099 files. A file list will be created, and then all files will be submitted at once.

Can files larger than 50MB be accepted?
Yes. The Department has the ability to accept files larger than 50MB.
Are password-protected files accepted?

No. The Department will not accept password protected files.

How do I confirm that the Nebraska Department of Revenue has received my file?

You will receive a reference number that the file transfer was successful and the file was received. Print a copy of the reference number screen for your records.

Is there a way to enter individual W-2s through your website?

The Department offers the Nebraska W-2 File Creator spreadsheet which can be used by employers that do not have software to create a file in the required 21EFW2 format. You must have Microsoft Excel 2003 or newer to use this spreadsheet.


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E-filing Form W-3N, Nebraska Reconciliation of Income Tax Withheld

Can I file my Form W-3N electronically?
Yes. You may e-file Form W-3N, Nebraska Reconciliation of Income Tax Withheld. To access the e-file system you must be issued a Nebraska Withholding ID number and PIN prior to December 15, 2011.
What is the due date for e-filing my W-3N?

The Form W-3N is due by February 1st of the year following the reporting period. If February 1st falls on a weekend or holiday, the due date is extended to the next business day.

When can I file my return?
The Form W-3N online filing system will be available on January 3, 2012. You cannot file your Form W-3N until you receive your paper form in the mail. If you have not received this form by January 10, 2012, please contact us.
Is it possible to e-file Form W-3N for prior tax years?
No. Only the current year Form W-3N may be filed online.
Do I need an ID number and PIN to e-file my Form W-3N?

Yes. You will use your Nebraska Identification Number found in the upper left-hand corner of your Form W-3N. Do not include the “21-” or preceding “0s.” Your PIN is the 5-digit number printed in the lower left-hand corner of your Form W-3N.

What if I can't find my ID number and PIN?

Contact Taxpayer Assistance at 800-742-7474 or 402-471-5729 for your Nebraska ID Number and PIN.

How do I access the online system to file my Form W-3N?

From our home page, click on the“File Your Return” button under "For Businesses” then “File Form W-3N” button.

  • Login using your company’s Nebraska ID Number.
    DO NOT INCLUDE THE INITIAL "21-."
  • Each withholding account is provided with a PIN, printed on the lower left-hand corner of your Form W-3N. Use this PIN for logging on to the secured website.
  • Print a copy of your Form W-3N for your records.

Successful filings will display a reference number. Be sure to print this notification for your records.

My fourth quarter payment is not shown on my return. Can I enter this payment online?

Yes. You must enter your fourth quarter payment on line 12 of the form.

How do I pay a balance due?
You can remit a balance due in one of the following ways:
  • Electronically using our E-Pay System.
  • Initiating an ACH credit through your bank.
  • With a credit card through Official Payments at 800-272-9829 or on their website: www.officialpayments.com. A fee of 2.49% of the payment amount or a minimum of $1.00 will apply.
  • Printing a voucher to remit payment by check.
*Be sure to file the Form W-3N and report the wage and withholding.
How do I know the Nebraska Department of Revenue has received my W-3N?

After you have successfully completed filing, you will receive a reference number. Print a copy of the reference number screen for your records.

Do I need to send in a paper return when filing via the Internet?
No. You will not file a paper Form W-3N.
If I enter an incorrect amount on my Form W-3N, how do I correct my error?

The back and next buttons will allow you to navigate through the unfiled return. Required fields must have values entered. The system will automatically check your calculations.

Once the return has been submitted, you will need to amend your original filing by mailing a paper Form W-3N with “amended return” written across the top of the form. Please include a written explanation of why you are amending the return.

Will I continue to receive my W-3N in the mail?

Yes. We will mail the Form W-3N the first week in January. Your Nebraska ID Number can be found in the upper left-hand corner of your Form W-3N. Do not include the “21-” or preceding “0s.” Your 5-digit PIN will be located in the lower left-hand corner of your Form W-3N.

Can I e-file if I am an annual filer?

Yes. Annual Form 941N filers will be able to file the Form W-3N online. Remember both the Forms 941N and W-3N must be filed.

I file Forms W-3N for more than one company. Can I e-file all at one time?

No. Nebraska does not allow for bulk filing of Forms W-3N. Each Form W-3N must be filed separately. You may use the online filing system to file each return separately.


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E-filing Form 941N, Nebraska Withholding Return

Do I need to register to e-file my Form 941N?
No. There is no registration necessary to use this program. Your Nebraska I.D. Number (User Name) and password (PIN) are printed on your 941N and allow you access into the system. If you wish to remit payment for your liability using the online payment option, no registration is needed. Unless you have changed your E-pay password to match the one printed on your 941N, you will use a different password for making your payment.
When can I file my return?

The system is available for filing beginning the first week of the month following the close of the reporting period You should verify that you are filing for the appropriate tax period on the website.

How do I remit payment for the return that I e-file?
You can remit a payment in one of the following ways:
  • Electronically using our E-Pay System.
  • Initiating an ACH credit through your bank.
  • With a credit card through Official Payments at 1-800-272-9829 or on their web site: www.officialpayments.com. A fee of 2.49% of the payment amount or a minimum of $1.00 will apply.
  • Printing a voucher to remit payment by check.
Do I need to send in a paper return if I e-file?

No. However, you should print the PDF version of your return for your records.

Can I e-file amended returns?

No. Only returns for the current period can be filed via the Internet. The tax period, is shown at the top of the 941N worksheet, the return, and the payment voucher.

Will I continue to receive my Form 941N in the mail?

Yes. Your paper return will continue to be mailed to you because it contains your User Name and Personal Identification Number (PIN). You will also continue to receive the paper so that you may file via paper and use the pre-identified return for record-keeping purposes.

When is the information I enter actually transmitted to the Department of Revenue?

Once you click the "File My 941N Return" button, the information from the 941N worksheet is transmitted to the Department of Revenue.

Can I e-file my Form 501N?
No. If you remit payment via EFT there is no monthly requirement to mail your 501N since it only serves as a voucher for check attachment.
How long will the PDF of my return be available?
The PDF will only be available until the system closes at midnight on the due date or next business day if the due date is a weekend or holiday.
Can I e-file if I am an annual filer?

Yes, but if you have signed up for the online payment option, be sure that your financial institution information is current with the Department.

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