Payroll local tax setup

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Posted on by Buffy Riegler

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My client needs to setup a local tax that excludes the first $5,000 of wages. I have tried many configurations and the closest I can get is to have no tax until the employee earns $5,000 and the wages are correctly taxed after the ytd wages are $5,000 but the pay when they reach the $5,000 is taxed entirely. For example, if the year to date is $4,900 and the current pay is $400, the entire $400 is taxed instead of only $300.

The setup is: Check Minimum YTD Taxable Wages ($5,000)

Apply Tax Rate.

I tried to utilize the Standard Deduction and the table but each time it would instead subtract the $5,000 from the annualized wages and apply the tax rate to the reduced amount.

Does anyone know to correctly set this up?

Thanks in advance!

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