US Payroll Instructions

US Federal Withholding Instructions

IRS introduced a new W-4 form in 2020. You should use it for new employees, and for any current employees who want to switch from the old W-4.

Rather than enter a number of exemptions, the new form uses a more complex calculation, and figures an amount to deduct from gross wages. How you set up employees depends on which W-4 form they use.

HINT: The 2023 Publication 15-T has instructions for using old W-4 forms with the new tables. In some future year, we will go back to having just one set of tax tables for US Federal taxes again. It will make US payroll much simpler!

EMPLOYEES USING NEW W-4 FORM

New employees hired after Jan 1, 2020 must use the new W-4 form. Instead of exemptions, the form calculates adjustments to annual gross income. The employee will need to read several pages of instructions, and do some math!

To calculate the gross annual adjustment, add the amount on Step 3 to the amount on Step 4b, then subtract the amount on Step 4a. Enter that total into Fed Withhold Amount field on the Employee account record (click the Payroll Setup button to see it). If line 4a is large, you may need to enter a negative number.

In the Tax Package field, enter the tax package for your state (if not visible, you will need to import payroll tabes first). Which package you use depends on whether the employee checked the box in Step 2. Use the New W2 Step2+ package if it is checked. Use the New W2 Step2- package if not.

NOTE: We split the Step2+ and Step2- packages in the 2022 update. Either IRS did not have separate tables before that, or we missed them. IRS also stopped providing annual formulas. We has to calculate the step amounts, since Step 3, 4a and 4b are annual.

Some states have multiple tables for different marital status or local tax rates. For those, there will be 3 versions of each: for old W-4s, and for new W-4 forms with and without checkmarks.

If the employee requests additional withholding on Step 4c, do the following:

1. Enter the amount from line 4c into the employee's Other Withhold Amount field. If the employee calculated an annual adjustment, divide it by the number of pay periods.
2. Choose Payroll Setup from the Costs menu, and choose Tax Tables.
3. Open the tax table that applies to the employee. You'll have to choose Single, Married or Head of HouseHold, and either New W2 Step2+ or Step2- depending on their choice on Step 2 of their W-4 form. Yes, the 2020 "tax simplification" made things much more complicated!
4. Choose Add Other Amount in the Third Adjustment popup field.
5. Turn on the Adjust After Table is Computed checkbox beneath it. Note that this will deduct the full amount from every paycheck.
6. Click OK to save changes.

EMPLOYEES USING OLD W-4 FORM

Employees who alread filed a W-4 may continue to use it. For them,Enter the number of claimed exemptions in the Fed Exemptions field in each Employee account (click the Payroll Setup button to see it).

In the Tax Package field, use the Old W2 package for your state. Some states have multiple tables for different marital status or local tax rates. There will be 3 versions of each, for old and new W-4 forms. Use the Old W2 version that matches the employee's status.

If an employee claims additional federal withholding on their W-4 form, enter it into the Fed Withhold Amount field in the Employee account record (click the Payroll Setup button to see it). If the employee calculated an annual adjustment, divide it by the number of pay periods. Also follow these steps to make sure the additional withholding is included:

1. Choose Payroll Setup from the Costs menu, and choose Tax Tables.
2. Open the Federal Single or Federal Married table as appropriate.
3. Click on the Second Adjustment popup field, and choose Add Federal Amount.
4. Turn on the checkbox for Adjust After Tablei s Computed. Note that this will deduct the full amount from every paycheck.
5. Click OK to save changes.

All Employees

Use the following to determine the value for the Marital Status popup menu in each Employee account:

• Single- single employee with one personal exemption
• Married- married employee with two personal exemptions
• Dual Income- married employee with one personal exemption
• Head of House- unmarried employee claims Head of Family status
• Other- not used

NOTE--: A few states use slightly different conditions for the marital status choices. Follow the links at the bottom of this page, to see specific instructions for your state.

Goldenseal will automatically calculate the correct federal withholding for each pay period.

Medicare Employee Withholding

Starting in 2014, there is an additional .9% employee withholding for Medicare that kicks in after an employee has earned $200,000 in a year.

NOTE-- This is the first time we experienced a deduction with a bottom limit! Our existing 4.9 update. We now have a deduction line item for the extra .9%, but do not automatically include it. Add it to your Tax Packages, if an employee earns more than $200,000 per year.

FICA EMPLOYEE WITHHOLDING

The employee withholding rate for Social Security was reduced temporarily, from 6.2% to 4.2%, between Jan 1, 2011 and Dec 31, 2012. As of January 1, 2013 it returned to the original 6.2% rate.