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Set up local taxes in QuickBooks Desktop Payroll

by Intuit•1• Updated 2 weeks ago

Learn how to set up local tax withholding for your company and employees.

Local taxes are payroll taxes employees and/or employers must pay in several states. These are in addition to the required State Withholding tax. They can be city, county, municipality, or school district taxes. 

You can set up local taxes in QuickBooks Desktop Payroll, but you’ll need to pay and file them manually outside of QuickBooks. 

States with local taxes

These states have local tax withholding: Alabama, Colorado, Delaware, Indiana, Kentucky, Maryland, Michigan, Missouri, New York, Ohio, Oregon, Pennsylvania and West Virginia. Not all cities in these states collect local taxes.

Step 1: Determine which local taxes you and your employees are required to pay

To make sure you get the most accurate local tax jurisdictions, get the physical address for your employees’ home and work locations. If you aren’t sure what city, municipal, or school district taxes your employee should pay:

  • Contact your local tax agency
  • Use the local tax resources below 

Here are some local tax resources and info

StateInfo/Resource
All states with local taxes:AL, CO, DE, IN, KY, MD, MI, MO, NY, OH, OR, PA, WVUse the USPS Address and ZIP code locator to determine the best city/ZIP code combo. We recommend Cities by ZIP code.

You can find local jurisdictions by address on the U.S. Census Bureau website. Select Advanced Search, then select Geography. Choose from specific summary levels. Enter the address (either work or home) in question, then select Search.
IndianaIndiana requires local taxes based on where the employee lived and worked on January 1 of the current year.  

Employees should complete Form WH-4.
MarylandMaryland local taxes are included when you set up State Withholding, so there’s nothing extra you need to do.
OhioOhio local tax finder. Use the ZIP code link and enter the 4-digit ZIP code extension for employee’s residence and work locations to find the specific applicable local taxes.  

If you don’t know the 4-digit extension, use the USPS Address and ZIP code locator.  
OregonEugene Community Safety Tax
Lane Transit District (LTD) tax
Multnomah Preschool For All
Portland Metro Supportive Housing Services
TriMet transit tax
PennsylvaniaLocal Income Tax requirements for employers and link to employee residency certification form

Find your PSD Code by address

Step 2: Create your local tax payroll item

  1. Go to Employees, and select Payroll Items. 
  2. Select New Payroll Item.
  3. Select Custom Setup, then Next.
  4. Select Other Tax, then Next.
  5. Select your local tax from the list. If the tax is not in the list, select User-Defined then choose:
    • ​Tax is to be paid by the employee; or
    • Tax is to be paid by the company.
  6. Select Next.
  7. Enter the name of the local tax and select Next.
  8. Enter the name of the local tax agency and account number if you have one.
  9. Select the Liability Account, then select Next.
  10. Select the Tax Tracking Type (check with your tax advisor if you do not know which to choose), then select Next twice.
  11. Enter the local tax rate, then select Next until you get to Finish.
  12. Repeat steps 1-11 for each local tax item. 

Step 3: Add the local tax to your employees

  1. Go to Employees, and select Employee Center.
  2. Double-click your employee.
  3. Select the Payroll Info tab.
  4. Select Taxes, then select the Other tab.
  5. Select the Item Name column (press Tab to go to the next available line), then select the local tax.
  6. Select OK.
  7. Repeat steps 1-5 for all your employees subject to this tax.

Step 4: Pay and file your local taxes

Local taxes are calculated and tracked based on your setup.  However, you’ll need to pay and file most local taxes manually outside of QuickBooks.

You can use the Payroll Tax Liability report to see your local tax liabilities. 

If you use QuickBooks Desktop Payroll Assisted, we pay and file the following local taxes for you:

  • Maryland
  • New York
    Note: Assisted payroll only supports NYC resident, NY Yonkers resident, and NY Yonkers non-resident local taxes. All other ones are set up and handled by you. If you need help with liability adjustments, contact us.
  • Oregon Transit District (LTD) and (Tri-Met)
QuickBooks Desktop Payroll AssistedQuickBooks Desktop Payroll BasicQuickBooks Desktop Payroll EnhancedQuickBooks Desktop Payroll Standard

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