How To Enter Payroll Tax Items

Payroll Tax Items can be added by going to Employees → Payroll Tax Items.  This screen allows you to set up the different taxes that will appear on the employee’s paycheck.

Before proceeding with setting these up, we highly recommend setting up a different vendor for each tax authority. This will allow you to use the Pay Tax function in ESC more efficiently, because the different IRS taxes will already be separated out. The three different types of taxes are Federal, State and Other, and the taxes can be applied to the annual income of the employee or their gross pay. In some cases, you can just use a flat percentage for the tax method, but at other times you’ll need to use a tax table. We store all of the up-to-date tax percentages for different situations. If you select "Tax Table" as the tax method, you’ll be given a drop-down menu from which to choose the tax table you’d like to use. This determines what percentage of taxes you will use when running payroll. Each time you run payroll, ESC will automatically go out to our servers and get the latest tax tables for you.

The vendor in this screen represents who you’ll be paying the taxes to and what liability account you want to use as the holding place for tax dollar accumulation. When tax is ready to be paid, you can go to Company → Pay Tax to see the dollar amount of the tax that is to be paid. If this tax has a limit on how much can be taken out annually or per check, you can specify that amount in the Limit field. The Reporting Type field plays a very important role, because it determines what reports your tax item shows up on.

Your tax ID number is something that you should have on file and is used in space 15 on the W-2 forms . If this tax is company paid you can place a check-mark in the box and select which expense account you want the money to come out of.

The “Apply To” tab allows you to choose which wage items and additions\deductions this tax applies to. This selection goes both ways so if you go back into the Additions\Deductions screen (under the Employees menu) and open up one of the items that the tax was applied to, you’ll notice that the tax is checked on the “Apply To” tab.