Drake Accounting®: How do I set up an employee's state tax and withholding?
To set up an employee's state taxes and withholding, go to Employees > Employee Setup > State Tax tab and fill out the following information:
- While working in ___, employee will use State Tax Table of ___ and SUTA of ___
- While working in information is pulled from the client's primary address (Client > Add or Edit > Contact Information tab). If the client has multiple locations and the employee works at more than one location (Works at multiple locations is selected at Employees > Employee Setup > Personal Information tab), select the applicable place of work in the Locations section, located in the upper-right corner of the Employee Setup screen. Locations must be established at Client > Locations in order for them to be added at Employees > Employee Setup.
- The employee's State Tax Table is used for tax withholding purposes.
- The State Unemployment Tax Act (SUTA) state flows to the State Code field when processing Live and ATF payroll.
- Employee is...
- Exempt from SUTA - Employee is exempt from paying state unemployment tax.
- Exempt from State WH - Employee is exempt from paying state withholding.
- State Withholding Options
- Wage Calculation Method - Use annualized payroll to calculate the state withholding as described in the publications for each state.
- Fixed Percent Method - Use a fixed percentage to determine the state tax, regardless of income. When Fixed Percentage Method is selected, the Filing Status/Exemptions section changes to prompt for the actual withholding percent used. Enter the fixed state tax percentage in the corresponding WH Percent field.
- Fixed Amount Method - Set each check's state withholding amount to a set amount. When Fixed Amount Method is selected, the Filing Status/Exemptions section changes to prompt for the set amount. Enter the fixed amount in the corresponding WH Amount field.
- Rounded - Round
state withholding amounts of 50 - 99 cents up to the next dollar.
Amounts less than 50 cents will be rounded down to the nearest whole
dollar.
- Filing Status/Exemptions - The fields Filing Status, Additional WH, and Exemptions are available when Wage Calculation Method is selected under State Withholding Options. Enter information from the employee's state W-4 here.
- General Selections - This section appears if additional state information is required based on the employee's State Tax Table selection.
- Blind - (IL, MA, or MS) Employee, Spouse, or Both are blind.
- Over 65 - (IL or MS) Employee, Spouse, or Both are over the age of 65.
- Wage Chart - (NJ) Wage chart for state withholding purposes.
- % Gross Taxable Wages - (AZ) If the employee is taxed based on a percentage of federal tax, choose the applicable tax rate.
- Number of Dependents - (AL or MS) Number of dependents the employee claims for state withholding purposes.
- Est. Deductions - (CA, LA, MS, NJ, or PR) If the employee qualifies for Estimated Deductions Reduction withholding, enter the amount of the deductions here.
- Worksite ID - (CO or IN) Employee's worksite ID.
- Dependents - (IN) Number of dependents the employee claims for state withholding purposes.
- Reporting Unit - (IA) Reporting unit number where the employee works.
Once complete, click Save. To check that state information was set up correctly, go to Employees > Employee Setup Review.