How to Make an Employee Exempt from Taxes

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How to Make an Employee Exempt from Taxes

Background:

There may be times that you may need to make an employee exempt from certain taxes that they are not liable to pay into, such as a pastor of a church or your minor child who works for you. If you mark an employee exempt from a tax no taxes will be calculated on that tax. Please be sure to check with your accountant before making any tax exemption changes to an employee in your payroll software.

To make an employee exempt from federal income tax withholding:

  • Go to Employee List> Choose Employee> Taxes.
  • Under Federal Income Taxes, click “Edit.” 
  • Select “Exempt” under ” “Local City Exemption Status.”
  • Click Save.

To make an employee exempt from state income tax withholding:

  • Go to Employee List> Choose Employee> Taxes.
  • Under State Income Taxes, click “Edit”. 
  • Select “Exempt” under ” “Local City Exemption Status.”
  • Click Save.

To make an employee exempt from local income tax withholding:

  • Go to Employee List> Choose Employee> Advanced Tax Settings. 
  • Under Local Income Taxes, click Add Local City Taxes Exemption Status. 
  • Click the radio button under Local City Exemption Status to Exempt. 
  • Add the “Effective Date” (or the date that the employee was exempt from local taxes.)
  • Click Save.

To make an employee exempt from SUTA tax:

  • Go to Employee List> Choose Employee> Advanced Tax Settings.
  • Under “SUTA,” click “Add SUTA Exemption Status.” 
  • Select “Exempt” under ” “Local City Exemption Status.”
  • Add the “Effective Date”  (or the date that the employee was exempt from SUTA taxes.)
  • Click Save.

To make an employee exempt from FUTA tax:

  • Go to Employee List> Choose Employee> Advanced Tax Settings.
  • Under “FUTA,” click “Add FUTA Exemption Status.” 
  • Select “Exempt” under “FUTA Exemption Status.”
  • Add the “Effective Date”  (or the date that the employee was exempt from FUTA taxes.)
  • Click Save.

To make an employee exempt from Social Security and Medicare taxes:

  • Go to Employee List> Choose Employee> Advanced Tax Settings.
  • Under “Social Security and Medicare,” click “Add Social Security and Medicare Exemption Status.” 
  • In the box “Social Security and Medicare Exemption Status,” select the option that matches your employee’s situation:
    • Not Exempt
    • Exempt from Medicare and Social Security
    • Exempt from Social Security Only
  • Add the “Effective Date” (or the date that the employee was exempt from Medicare and/or Social Security.)
  • Click Save.

For more information on making edits to an employee, please check out our article, “Editing Employee Tax Information.”

If you need to make a company exempt from any taxes, you’ll make changes to these in the company settings. Check out this article, “Company Payroll Tax Settings In Patriot Software.” 

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