Figuring out Federal and State tax withholdings, can be very confusing. Especially with all the options in Microsoft Dynamics GP. In this guide, I’ll help you to understand the Employee Tax Maintenance and State Tax Maintenance windows and how you should decipher the forms given.
The Employee Tax Maintenance window works off of the Federal W-4 Form. The State Tax Maintenance window works off of the State’s equivalent of the W-4 Form.
Here is a link to those forms: http://www.bls.gov/jobs/statetax.htm
If you only have your employees fill out the Federal W-4 Form, you’ll use this for both windows to fill in the information. For the State of California as an example, you’ll use the DE-4 form for the number of additional withholdings allowances for estimated deductions claimed if completed by the employee.
Employee Maintenance Tax Window
To help fill out the Employee Tax Maintenance Window in GP, we will use the following W-4 example.
As seen above, John is Married and claiming three (3) allowances. Just given this information we will assume that John has at least one (1) dependent.
- Select the appropriate federal filing status for the employee. This determines the tax table that will be used to calculate federal taxes.
- If the employee is eligible for advanced earnings income credit payments, select the proper Earned Income Credit (EIC) filing status for the employee.
- Enter the number of exemptions the employee has claimed on his or her W-4 form. Then enter the additional amount, if any, that the employee specified to be withheld on the W-4 form [Slot 6 on the form]. This amount will be added to either the calculated or estimated federal withholding to determine the total federal withholding for each pay run.
- Rarely have I seen Estimated Withholdings entered in GP, however this would be the amount that should be withheld in each pay run if the employee estimates his or her federal tax liability instead of using tax table calculations. If there is an amount entered in the ‘Additional Federal Withholding’ field, the additional amount will not be added to the estimated withholding amount.
- Enter the State for Income Tax and Local Tax Code.
- Mark ‘Household Employee’ if the employee is someone who works in or around a private residence. Mark ‘Medicare Qualified Gov’t Employee’ if the employee is exempt from FICA Social Security tax but is subject to FICA Medicare tax.
- Mark the ‘Withhold New York State Tax Difference’ if the employee’s state of residence is New York, but the tax withholding state is a different state.
- Mark the W-2 boxes that apply to the employee. These will print on the W-2 Statement.
- Next, click the State Tax button
Employee State Tax Maintenance Window
The example below is of the DE-4 form for the state of California, used to complete the Employee State Tax Maintenance window in GP.
***Again, the number in box 1 is three (3). ***
- Enter the state code for which the employee’s income tax is withheld.
- Select the proper filing status for the employee. The options given will depend on the state code you have entered.
- Enter the number of dependents claimed by this employee as exemptions. Don’t count the employee’s own exemption or that of his or her spouse in the Number of Dependents field.
****You’ll notice in the example, John has three (3) allowances and therefore has a filing status of Married, 2 or More Allowances with Personal exemptions of 1. Self, 2. Spouse, 3. 1 Dependent. This equals his three (3) allowances.****
- Enter the number of the personal or itemized exemptions claimed by the employee that are not related to Self and Spouse. Remaining boxes are for: Blind, Blind Spouse, Over 65, Spouse Over 65, and Special Allowance.
- Enter the amount that should be withheld from each paycheck if the employee indicated so on the state’s equivalent of the W-4 Form (In California, the DE-4 Form) that additional taxes should be withheld from each paycheck. This amount will be added to the calculated or estimated state withholdings.
- Enter the amount of estimated state tax to be withheld from each pay run for employees who estimate their state tax liability instead of using tax table calculations.
- Mark all the exemptions that the employee has claimed on his or her state’s W-4 Form. These exemptions are for state tax purposes only.
Employee Taxes Should Be Easy
Entering employee tax information does not have to be confusing and difficult. Following the above steps will help you enter the information quickly and efficiently. You can then rest assured you have entered the information correctly.
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