What are courtesy withholding taxes?

In some states, if an employee resides in a different city, county, or state and works in another, they might be required to pay taxes for both localities.

As their employer, you might not be required to withhold and deposit taxes for both.

Note:

Individual local and state taxation rules vary. Consult with the appropriate tax authorities for complete compliance info on whether you're required to withhold.

Here's how the courtesy tax withholding hierarchy works

Before you can set up your organization for courtesy withholding, you need to understand the hierarchy courtesy taxes use. Configurations at lower levels override those at higher levels.

1. First it checks the configuration on the payroll statutory unit (PSU).

2. Then it checks the tax reporting unit (TRU).

   Entries here override the PSU.

3. Then it checks the employee Tax Withholding card.

   Entries here override both the TRU and PSU.