Payroll Taxes by City

Setting Up and Converting Payroll Taxes by City or Local Municipality

Related: Ohio and Pennsylvania Payroll Tax Setup

Total Office Manager allows you to setup payroll that is specific to a city or municipality. This makes it easy to withhold taxes from various locations that they worked in. Our software knows where people worked, based on work order and time sheet information. The withholding and other calculations are done automatically.

The following are instructions for how to create or change your existing payroll setup to stop using the city earnings that were setup and consolidate them to one earning for regular time, one for overtime, and one for double time.

The process will vary by company.  For instance, some companies will stop using city earnings and will need to consolidate down to union-only based earnings. Other companies may need to consolidate down to just union earnings. States such as Washington and Oregon state would likely setup differently due to L&I. Please speak to your accountant if you are unsure about any of these issues.

Step-By-Step Setup

1. Edit each earning item that you are wanting to revamp and click the Add All Taxes button.  This will append the taxes and liabilities that are not present.
2. Manually select each deduction you would like to calculate based on the earning amount or hours.
3. Edit each employee record and remove all taxes the employee is not obligated to pay in each payroll.  By default each employee will have a minimum of three taxes (FIT, FICA Med, FICA SS) and four if they are in a state with state income tax.
4. Add any SDIT (School District Tax or EUI (Employee Unemployment Insurance) that may be applicable.
5. Inactivate any liabilities that are not needed and add any liabilities that are required for the employee.
6. Inactivate any earnings that are no longer needed.
7. If you are required to pay payroll taxes based on the locality of the work performed, edit each tax and check the box Include on Customer:Jobs.
8. For any customer that is to have taxes calculated based on the location worked in, add the payroll tax to the Customer:Job Tax Info tab. There is a way to allocate taxes to a group of customers. Go to Customer:Job list | Actions | Batch Update Payroll Taxes Allocated.
9. The technicians must have time sheet entries for each of the places where tax must be paid. Please make sure that the correct work order is selected for each row on the time sheet. The work address of the work order is vital.

How City and Local Payroll Taxes Works

When processing payroll, the tax will calculate based on the timesheet entries entered for the Customer:Jobs by employee.

Important Note: The timesheet entries must be associated with a work order. Please make sure that the correct work order is selected for each row on the time sheet. The work address of the work order is vital.

City and Local Payroll Tax Tips

1. CAUTION: Only select states require the Customer:Job tax option.  Ohio and Pennsylvania are two that we currently know that are the biggest on this.  Ohio just recently passed a law that states if you don’t work more than 20 hours in the city, you don’t pay the city.  This means any money withheld would be refunded to the employee.  Internal audits of employee work localities would need performed and processes in place to handle this.
2. Setup will vary by company, state, and city.
3. The timesheet entries must be associated with a work order. Please make sure that the correct work order is selected for each row on the time sheet. The work address of the work order is vital.

Related Payroll Content

How to Setup a Payroll Tax Item or a Payroll Liability Item