Configure Blocked or Exempt Employee Tax Withholding
UKG Pro Tax Configuration Overview
Tax configuration is critical regarding how reports and forms reflect earnings and tax data. A common area of confusion is whether to set an employee’s taxes as withhold and report, exempt from withholding, or blocked. Tax implications of each are very different, especially during year-end, as these settings drive the amounts that populate on the employee’s Form W-2. In addition, identifying which local taxes are withheld and reported impacts tax liability for the employee.
Exemption from Withholding - State Taxes
When the Employee Claims Exemption from Withholding box is checked, wages are accumulated and calculated. Information is included in tax filing reports and on the employee’s Form W-2, and taxes are not calculated or withheld. The Employee Claims Exemption from Withholding check box only applies to state income tax withholding.
Not Subject to Work In or Resident State Taxes
On an employee's Resident Taxes page, the Reciprocal Tax Agreements section contains the following check boxes.
Not Subject to Work In State Tax
Select the Not Subject to Work in State Tax check box if the employee resides and works in different states, where the employee’s resident state has a reciprocal agreement with the state in which the employee works, and the employee is not subject to the work-in state tax.
Not Subject to Resident State Tax
Select the Not Subject to Resident State Tax check box if the employee resides and works in different states, where the employee’s resident state has a reciprocal agreement with the state in which the employee works, and the employee is not subject to the resident state tax.
Not Subject to Tax- Local Taxes
When the Not Subject to Tax box is checked on the, the tax is not withheld from wages. The tax is NOT included in tax filing reports and on the employee’s Form W-2; however, taxes are blocked and not calculated or withheld. The Not Subject to Tax check box in the Local Taxes section only applies to local income tax withholding.
Block Tax Amount - Local Taxes
When the Block Tax Amount box is checked, wages are accumulated and calculated. Information is included in tax filing reports and on the employee’s Form W-2; however, taxes are blocked and not calculated or withheld. The Block Tax Amount check box in the Local Taxes section only applies to local income tax withholding.
Exempt from Taxes
When the Employee Is Exempt From box is checked for federal, state, and/or local taxes on the Exempt from Taxes page, wages are not accumulated, calculated, or reported. In addition, no applicable taxes are withheld.
Exempt from Tax means the employee's wages are neither calculated nor reported and taxes are not withheld. This is different from Exempt from Withholding where the employee's earnings are both calculated and reported, but no tax is withheld.
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