How do I change an employee's tax withholding?

To change taxes, go to Employee Management > Employee Pay > Tax Information.

Adjust the W-4 fields such as filing status, dependents amount, deductions, or additional withholding where desired. If you are missing a tax jurisdiction you think should be available, double check the Resident Location (home address) and Work Location. Federal income tax may not be withheld if the employee’s taxable wages for a specific paycheck are below the IRS threshold for their filing status. This is common for smaller paychecks or for employees with a Married Filing Jointly status, as the IRS thresholds for this filing status are higher. For commission-based employees, ensure hours or dollar amounts are entered for the current pay period to include them in payroll processing. Without these entries, they will not appear in payroll previews or receive pay.

Additionally, pre-tax deductions such as 401(k) contributions can reduce taxable wages below the IRS threshold, resulting in $0 federal withholding. The 2020 W-4 form no longer uses exemptions or allowances; instead, withholding is determined by fields like Filing Status, Dependents Amount, and Additional Withholding. Employees can also add a fixed dollar amount under the "Additional Federal Tax" field in their tax settings to ensure federal tax is withheld from every paycheck. For further assistance, employees may use the IRS Tax Withholding Estimator to calculate an appropriate additional amount based on their financial situation.

Make sure you have the employee fill out the appropriate government documentation related to the change in withholding status so that you have the proper records. The IRS form is the W-4, and each state that has state withholding will have a form as well. Generally, these forms are easily found using a search engine (e.g. for California, search "California state withholding form for employees").

Ensure the “Block Tax” option is unchecked unless the employee is exempt from federal withholding and has submitted a valid exempt W-4.

Employees claiming exemption from federal withholding must submit a new W-4 form annually to maintain their exempt status.