Configure County and City Withholding Rules for Courtesy Taxes

The payroll process automatically calculates residential local tax for all employees. However, as their employer, you might not be required to withhold them. In such cases, the withholding is considered a courtesy.

By default, the payroll process withholds these courtesy taxes. If you don't want to withhold them, use the following tasks.

1. Use one of the following tasks to change the state tax withholding rule.

   • Legal Entity Calculation Cards to change the values for a payroll statutory unit (PSU)

   • Legal Reporting Unit Calculation Cards to change the values for a tax reporting unit (TRU)

     This overrides any values on the parent PSU.

   • Calculation Cards to change the values on an individual employee's Tax Withholding card

     This overrides any values on the PSU or TRU.

2. Configure any relevant counties and cities on the calculation cards.

3. Identify their resident wage-accumulation rules.

There are multiple county and city tax resident wage-accumulation rules available to you.

Note:

Don't configure courtesy tax withholding rules for local residence taxes that take precedence over work taxes. This includes Indiana county and Pennsylvania Act 32 jurisdictions.

Select the best one based on the tax withholding rule you have chosen.

If you're using this tax withholding rule	It does this	And you can select this for Resident Wage Accumulation
All counties	Default withholding rule for all counties.	Leave blank. The payroll process automatically withholds for all counties using the default action for each county.
All cities	Default withholding rule for all cities.	Leave blank. The payroll process automatically withholds for all cities using the default action for each city.
Only counties under county tax rules	Identifies the resident counties that require special withholding rules.	The field displays the values appropriate for the selected county. Select one of the following. Calculate tax independent of all other jurisdictions Credit resident tax by work tax, accumulate wages if taxed Credit resident tax by work tax, always accumulate wages No resident tax if work or residence mismatch, accrue if taxed Use default action
Only cities under city tax rules	Identifies the resident cities that require special withholding rules.	The field displays the values appropriate for the selected city. Select one of the following. Calculate tax independent of all other jurisdictions Credit resident tax by work tax, accumulate wages if taxed Credit resident tax by work tax, always accumulate wages No resident tax if work or residence mismatch, accrue if taxed Use default action
Only withhold tax at work county	Withholds taxes for the work county only, and disables courtesy withholding entirely.	Leave blank. The payroll process withholds only the work county tax, so no further configuration is needed.
Only withhold tax at work city	Withholds taxes for the work city only, and disables courtesy withholding entirely.	Leave blank. The payroll process withholds only the work city tax, so no further configuration is needed.