Form W-4: Employee claims they are 'exempt' from withholdings. How do I handle that?

The federal form W-4 is where employees determine the number of allowances to claim for tax purposes. Some employees may claim they are “exempt” from withholdings. Their earnings are still taxable, but they want nothing withheld. In Procare you simply do not assign the Federal Income Tax withholding to them.

Go to the Employee Withholdings screen:

a. Confirm Federal Income Tax (and possibly State Income Tax) is not assigned to them.
b. If it is assigned, click once on the line to select it and use the Delete button to remove the withholding.

Important! Do not check the “exclude” box. Excluding a tax affects taxable earnings (and the W2).