Use adjustment methods to specify whether a tax calculation needs adjustment for an employee and how to adjust the tax (Setup, Employees, Taxes). Review the list of tax adjustment methods below: No adjustment This is the default adjustment method. The tax calculates as specified in Taxes, Tax Rates and Payroll doesn't make any adjustments. Earnings accumulate in the taxable and subject-to columns, and taxes accumulate in the tax columns. NOTE: When you set up a workers' compensation tax, you can only select the No adjustment method. No tax Payroll doesn't calculate or withhold taxes. Earnings accumulate in the taxable and subject-to columns, but no taxes accumulate. Tax information still appears on the W-2 form. Exempt Employee is exempt from the tax. No earnings accumulate in the taxable and subject-to columns, and no taxes accumulate. If an employee selects Exempt on the W-4 form, use No tax rather than Exempt. When using Exempt, tax information doesn’t appear on the W-2 form. For example, you can use this option for a member of the clergy. Addon Payroll takes the normally calculated tax amount, and the additional amount entered in Adj Amount. Earnings accumulate in the taxable and subject-to columns, and taxes (including the addon amounts) accumulate in the tax columns. For example, you can use this option for an employee who requests to have an additional flat amount taken in taxes. Addon percent Payroll takes the normally calculated tax amount, and an additional percentage of that calculated tax amount according to the percentage entered in Adj Amount. Earnings accumulate in the taxable and subject-to columns, and taxes (including the addon percentage) accumulate in the tax columns. For example, you can use these options for an employee who asks to have an additional 5% of the withholding taxes taken in taxes. Enter the percentage in the Adj Amount column (Enter 30% as 30.00). Replace Payroll uses the amount entered in Adj Amount as the tax amount instead of the normally calculated tax amount. Earnings accumulate in the taxable and subject-to columns, and taxes accumulate at the replacement rate in the tax columns. For example, you can use this method if an employee asks to have a flat amount taken in taxes instead of the normal taxes. Replace percent Instead of the normally calculated tax amount, Payroll calculates the tax by multiplying the taxable amount by the percentage entered in Adj Amount. Earnings accumulate in the taxable and subject-to columns, and it calculates taxes at the entered percentage accumulate in the tax columns. Enter the percentage in the Adj Amount column (Enter 30% as 30.00). Formula The tax calculates using the formula entered in Formula. Use this method if none of the above adjustment methods can accommodate the tax requirements. |