Deduction Codes for Withholding Tax

Deduction Codes 95, 96, and 97 are pre-defined by CCS Payroll to handle Federal, State, and Local withholding respectively. They are all defined with a Type of 02 (Percentage of Gross). Leaving the Amount field at 0.00 causes the program to refer to the respective Tax Tables for all calculations. If you enter a value other than 0.00 in the Amount field, then the Code will function like any other Earning or Deduction Code, ignoring the Tax Tables.

By way of illustration, let's imagine that you are doing a payroll in the city of Yonkers, New York. The city of Yonkers imposes a local tax of 5% of the amount paid to the State of New York. Here is how the Codes would be set up to automate this process:

Code 95--Federal Withholding: Leave it as is so that it will access the Federal Tax Table.

Code 96--State Withholding: Leave it as is so that is will access the State Tax Table.

Code 97--Local Withholding: Make the following changes:

1. Type: 08 (Percentage of Deductions)
2. Amount: 5.00 (representing the 5% Local Tax)
3. Include: 96 (the # of the Deduction Code for State Withholding)

By including Deduction Code 96 in the Local Tax code, you instruct the program to calculate five percent of the amount deducted for State Taxes as the amount to withhold for Yonkers City Local Taxes.