How do I add a new line item to payroll that is not subject to FICA?

You don't need to create a payroll item, erconlin.

If the employee is exempt from FICA, just follow the steps below:

1. Click Workers on the left pane. 
2. Select Employees.
3. Select the employee's name.
4. Click the Pencil icon next to Pay under Employee Details.
5. Select the Pencil icon that's under What are (employee's name) withholdings?
6. Scroll down to Tax Exemptions and click on the drop-down arrow.
7. Place a check-mark in the box for any exemptions. 
8. Click Done.

Check out these articles for reference:

• Employee Payroll Tax Exemptions
• Exemption Status of Foreign Employees with Particular Visa Types

Let me know if there's anything else you need help with.

That sounds like an easy fix. However that won’t work for this case because the business is a restaurant that has done the government loan to help with payroll. We need to add a tips line to pay the employees tips they would have gotten that is subject to federal withholding but not FICA. My boss told me it has something to do with the stipulations on it.

Hi there, @erconlin. 

Thank you for reaching back to the Community. I just want to make some clarification on here, Is the government load you referring to about COVID loan? If No, then if the employee subjected to the exemption from FICA you can check-mark the Social Security and medicare as this is under FICA taxes. You can follow my colleague steps above. 

To learn more about FICA you can check out these articles:  

• Social Security and Medicare (FICA) taxes 

• Employee payroll tax exemptions 

I'll be always around to lend you a helping hand if you have any other questions about your Taxes. Have a great day!