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Level 1

Employee Paid City Taxes - adding exemption to payroll item

I have an employee that will need to pay Detroit City taxes.  The City of Detroit has an exemption of $600.00 per exemption.  For this employee his total exemption would be $1800.00 annually.  When setting up this payroll item, I do not have an option for adding the exemption only a limit (Using QB 2017 Contractor Edition).  How do I add the exemption per employee so that City of Detroit taxes are calculated and deducted?

12 Comments
Moderator

Employee Paid City Taxes - adding exemption to payroll item

Welcome aboard to the QuickBooks Community, @BickJen.

 

You can set up a tax-exempt on the Taxes option of your employee's payroll information. This can be done individually.

 

Here's how:

  1. Go to the Employees menu and select the Employee Center.
  2. Double-click the name of the employee.
  3. Then click the Payroll Info tab.
  4. Select Taxes and go the Federal tab.
  5. From the Filing Status drop-down, choose Don't Withhold.
  6. Next, go to the State tab. From the Filing Status drop-down, choose the appropriate option. 
  7. Select OK twice to save your selections.
  8. Repeat these steps for each exempt employee.

tax exempt1.PNG

 

 

tax exempt2.PNG

 

For more information, you can check out this article: Set up tax exempt employees.

 

Leave a comment if there’s anything else you need. I’m here to keep helping. Have a good one!

Level 1

Employee Paid City Taxes - adding exemption to payroll item

Thank you for your response but that is not the question that I have.  I am not referring to tax exempt status for Federal, State or City taxes.  Please see the images below.  When I set up the Pontiac City Taxes, I was allowed to enter the dollar exemption amount.  See image for MI-PNT.  I am trying to duplicate this for the City of Detroit Taxes (not the rate, just the exemption).  See image for MI-DET.  It is asking for a "Limit" - I need the same box as the "Exemption" on the PNT - not a limit.  Sorry - have two replies here.

Level 1

Employee Paid City Taxes - adding exemption to payroll item

Thank you for your response but that is not the answer to the question I have.  Please see the images below - I need to add a dollar amount to the Detroit City Taxes so that they calculate correctly.  I am doing exactly the same thing for Detroit as I set up for the City of Pontiac.  However when I set up the city of Pontiac 2 years ago, I had a drop down to select that city.  The set-up is not giving me a drop down so I have to create a user-defined payroll item.  I need to add an exemption total - not a limit.  How can I do that?

 

QuickBooks Team

Employee Paid City Taxes - adding exemption to payroll item

Thanks for getting back to us and providing clarifications, @BickJen.

 

QuickBooks currently doesn't support the automatic calculation of MI-Detroit. That's the reason why the User-Defined Tax you've set up doesn't have the same details as the MI-PNT.

 

For now, you may have to manually calculate the deduction for this certain tax until it reaches the exemption limit. Please run the Payroll Summary Report to know if the employee already reached the specified amount. 

 

Here's how:

  1. From the Reports menu, select Employees & Payroll.
  2. Choose Payroll Summary.
  3. Filter the report in the way you want.

Summary 1.PNG Summary 2.PNG

 

Take a look at this resource for the details: Create a payroll summary report.

 

I also recommend checking out this article to ensure you're compliant with the state regulations: Michigan Payroll Tax Compliance

 

Please know that you can count on me, so leave a comment if you need anything else. Take care!
 

Level 1

Employee Paid City Taxes - adding exemption to payroll item

So what would the limit be?  If he has a total of $1800.00 for the calendar year - do I need to fill anything in for the "limit" box?  Does "Limit" and "Exemptions" mean the same thing?

QuickBooks Team

Employee Paid City Taxes - adding exemption to payroll item

Hello, @BickJen.

 

Let me share additional information so you'll be able to completely set up your user-defined tax in QuickBooks.


An exemption is different from the limit. It is a deduction allowed by law to reduce the amount of income that would otherwise be taxed. While limit determines how much of these allowances/reimbursements are taxable or otherwise in our hands.

 

The limit you'd need to enter depends on the maximum amount set for each employee. I'd also recommend consulting with your State or City tax agency so you'll be provided with accurate information.

 

I've got these articles to learn more about managing your payroll-related information:

Keep me posted if you have other questions. I'm always here to help.

Level 1

Employee Paid City Taxes - adding exemption to payroll item

The City of Detroit allow $600.00 per exemption totally $1800. for this employee?  Where do I put the exemption then?  Do I really have to hand calculate these taxes every payroll (weekly)?  I have the enhanced payroll subscription.

QuickBooks Team

Employee Paid City Taxes - adding exemption to payroll item

Hello, @BickJen.

 

You can set up the MI-DET payroll on each employee and enter the limit. I can walk you through on how it works.

  1. Go to the Employees menu.
  2. Choose the Employee Center.
  3. Select the Employee who needs to be setup with MI-DET.
  4. From Employee Information window, click the Payroll Info menu.
  5. Click the Taxes button.
  6. In the State tab, choose the State where the employee works and lives. 
  7. Go to the Other tab.
  8. From the Item Name columns, choose MI-DET.
  9. Enter the Rate and the employees limit.
  10. Click Ok.

Let me know if you have other questions. I'm always here to help.

Level 1

Employee Paid City Taxes - adding exemption to payroll item

So again, my question, is "Limit" the same as "Exemption"?  In a previous post it was said that they are not.  $1800.00 is not a limit, it is the total that will be deducted from the employee's annual gross pay and then the withholding rate is calculated.  So I am assuming that if an "exemption" were in place in the employee's record that QB would automatically calculate the taxes due for that pay period.  

Moderator

Employee Paid City Taxes - adding exemption to payroll item

I've read the thread and I want to add details about this, BickJen.

 

Yes, Limit is different from Exemption. Limit is the maximum tax amount that can be deducted from the employee's pay in a year. This was explained on the earlier responses, too. Exempt is the tax amount you can deduct per payroll of the employee. You can also based the detailed information about Exemption through this file: 2019 City of Detroit Income Tax Withholding Guide.

 

While QuickBooks doesn't support the automatic tax exempt calculation, we can give you a workaround, which is to create a User-Defined Tax. This is where you can enter the Limit and other details. You can follow juVielL's answer to set up the payroll item.

 

For now, you can calculate the tax exempt based on the limit manually. To do this, you can divide the Limit to the number of paychecks you'll produce for the employee in a year.

 

We'll be around if you have more clarifications about this.

Level 1

Employee Paid City Taxes - adding exemption to payroll item

Thanks. I had already created the user-defined tax. So the simple answer to my question is that I have to hand calculate the City of Detroit taxes based on weekly earnings for every employee that is required to have City of Detroit taxes withheld. Perhaps you can submit a request to Intuit that could remedy this cumbersome burden on the payroll process. 

Moderator

Employee Paid City Taxes - adding exemption to payroll item

Yes, we've submitted a feature request about this to our Product Development Team, BickJen.

 

They're already coordinating with other engineers so this can be applied to QuickBooks. Though we don't have a timeline on when this will be available, you'll receive a notification about it.

 

You'll also be advised to update your payroll tax table and the QuickBooks release versions once new features are available.

 

Have a great day!

 

 

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