Note: There is a new article that addresses entering the the new 2020 W4 withholdings. View Article

For each employee you’ll assign the appropriate withholdings for taxes, health insurance, etc. and any variables such as their filing status (single, married) and number of allowances claimed.

Note: the Payroll module does not support automatic calculation of nonresident alien withholding adjustments; however, you may still choose to withhold extra. See: How to Withhold Extra Income Tax.

Getting There

  1. At the main screen of Employee Data & Payroll Look Up an Employee.
  2. Click the Withholdings icon (building) on the toolbar.
    toolbar-withholdings

Assign Withholdings

At the Employee Standard Withholdings screen a list of the withholdings currently assigned to this employee will be displayed. You may want to do one of several things:
Use Auto Fill

  1. The Auto Fill button will only be visible if this person has not yet had any withholdings assigned to them. Click Auto Fill to automatically assign Federal Income Tax. Social Security, Medicare, and State Income Tax (based on the state in which this person lives).
  2.  Edit the variables for Federal Income Tax, Medicare, and State Income Tax to specify the person’s filing status, allowances claimed and any additional amount they want withheld each paycheck.
    1. Either dbl-click the name of the withholding (like Federal Income Tax) or click once on the name then click the Variables button.
    2. Enter a Value for each item, like the filing status. For the Federal Income Tax, we support both the 2019 W4 and the new 2020 W4 withholdings.
    3. Click Save > Exit.
  3. Use the New Withhold button to add any additional withholdings for things like health insurance, retirement, employee child care, etc. (see below).

Add New Withholdings

  1. To add withholdings click New Withhold (lower left).
  2. At the Withholding Editor you’ll select the withholdings for this person.
  3. Select a Category (upper left) such as Federal, State or General.
    Note: You may Download General Withholding Formulas for things like health, retirement and so forth or create New General Withholdings from scratch.
  4. Choose a Class Name and/or SubClass like Income Tax, Health Plan, Retirement, etc. then click the Load button.
  5. Type a Comment if you wish (optional). This would be something unique you wanted to remember about this withholding for this person. It might be appropriate if the item was unusual, like a garnishment, and you wanted to make a note about it.
  6. Enter a Value for any variables that apply to this withholding such as the health plan amount, number of allowances, filing status (single, married), etc.
  7. With the appropriate Values entered for this employee click Save (lower right).
  8. To continue adding more withholdings to this person click New (upper right).
  9. Repeat the steps by choosing a Category, Class Name and/ or SubClass, etc. for each item. Remember to click Load.
    Note 1: Some withholdings like Social Security and Medicare do not have any variable Values to enter. Once the withholding is loaded just click Save.
    Note 2: If you have assigned all items in a category (like Federal) that category will no longer appear as a choice when adding new withholdings.
  10. When you have assigned the last withholding to this person click Save > Exit to return to the list of withholdings assigned to them.
  11. Check the Exclude box in the following situations ONLY:
    1. To temporarily turn off General Withholdings you create such as employee child care, etc. The withholding will be skipped for any paychecks issued to this person until you return and uncheck the box.

      Warning! If you “exclude” a federal or state withholding (income tax, Social Security, Medicare) the taxable earnings (and W2) will be affected. The person’s gross pay will not count toward taxable earnings for either employer or employee paid taxes AND the earnings will not be reported on the W2. In other words, neither party will pay tax on those earnings. This is almost ALWAYS WRONG.

      See: How to handle employees who claim “exempt” on form W-4.


    2. To permanently exclude a withholding. Used when neither the employee nor employer pay any amount for that person and the earnings are not to be reported on the W2. Talk with your tax advisor before using the “Exclude” checkbox.

  12. Review the withholdings to make sure they are correct. Use the Up & Down arrows to change their order as needed then click Save > Exit.

Edit Variables for a Withholding
You may change the variables for a withholding such as the person’s filing status, allowances claimed, amount for insurance, etc.

  1. Either dbl-click the name of the withholding (like Federal Income Tax) or click once on the name then click the Variables button.
  2. Enter a Value for each item like the filing status.
  3. Click Save > Exit.

Delete a Withholding

  1. To delete (or remove) a withholding from a person click once on the name of the withholding to select it.
  2. Click the Delete button.
  3. Click Exit.

No State Income Tax?
If your state does not have income tax there is no need to use the “State” category. At the time of this publication, states without income tax included: AK, FL, NV, NH, SD, TX, TN, WA and WY. If one of these states is assigned to a person it won’t matter. The amount to withhold will be zero.