Drake Accounting® gives the user full access to configure federal, state, and local rates and withholding amounts.
Watch the Setting Up Withholdings video for a demonstration.
To access this feature, go to Firm > Rates & Withholding Setup. The menu, gives you the option to setup Federal, State, and Locality rates and withholding amounts.
The rates for the 940, Social Security, Medicare, and Minimum Wage rates on the left side of the window as well as the withholdings are determined by the IRS and are accurate when the program ships. These figures can be manually updated if they are changed by the government, or wait for them to be patched.
Note: To edit, select a Bracket Low, Bracket High, Flat Amount, or Rate and type the new amount.
To enter or edit federal rate and withholding limit information:
- Edit the Rates, Wage Base, and Minimum Wage as needed.
- The Additional Employee Rate and Additional Employee Threshold fields are for additional Medicare information.
- Withholding Allowance and Additional amount for Non-Resident Alien amounts are annualized amounts and are published in IRS Publication 15.
- The grid at the bottom of the screen is the annualized withholding chart.
- This comes from IRS Publication 15-T, Section 1. Percentage Method Tables for Automated Payroll Systems, and is the basis for the withholding calculations used in Drake Accounting®.
- Click Save when editing is complete.
State payroll rates and limits are determined by each state's Department of Labor. These rates and limits can generally be found on the state Department of Revenue or Department of Labor site. In some states, rates are assigned by employer/business. In this instance, the employer/business should receive communication from the state with their assigned rate. Set the state information needed to generate payroll in this section. As rates and limits change, make the necessary changes. The state withholdings are already included in the software, however, if withholding amounts change, you will need to make the necessary changes within this window, or wait for program to be patched.
These are the rates and limits in the state where the client is located. Enter and edit the rates by going to Firm > Rates & Withholding Setup > State Setup. Once entered, the rates roll forward each year and will need to be edited if they change.
Note: If using Drake Accounting® for bookkeeping only, this information is not necessary.
Set the rates and withholding limits for all clients in a given state once by using the Global Rates option from the Client drop list. If a client uses different state rates and withholding limits than those entered as “Global Rates”, select the client from the Client drop list and enter the client-specific state rates and withholding limits.
To enter or edit state rate and withholding limit information:
- Go to Firm > Rates & Withholding Setup > State Setup.
- Select a state from the States list.
- Either select “Global Rates” from the Client drop list to enter state rates and limits that are not client-specific, or select a client from the Client drop list to enter client-specific rates and withholding limits.
Note: When you override the default rates for a client, a blue validator () will appear to let you know the client-level rate is overriding the global rate. This means the new amounts you enter will be specific to that client only, not all clients (global). To reset the rates to the global rates, select Default Rates. This will remove the client's override rates. If you select Default Rates when <Global Rates> is selected from the Client drop menu, it will remove the client override rates, and all clients without overrides will use the original rates that were shipped with the product.
- Enter the appropriate rates and withholding limits (options may vary based on state selection):
- State Wage Base
- Used to determine taxable wages for unemployment (SUTA) tax due and state quarterly taxes due.
- Contribution Rate
- Used to determine state quarterly tax due. (All rates should be entered as a decimal. Example: a rate of 1.25% should be entered as 0.0125
- Assessment Due Rate
- Used to determine assessment taxes due for unemployment (SUTA) Form 940 and state quarterly tax and wage reports.
- Training Contribution Rate
- Enter the percentage rate to flow to your state.
- This is a tax charged by some states based on state guidelines relating to training enhancement contributions.
- Some state forms have the specific calculation information programmed into their forms.
- Surcharge Rate (Only SD and IA charge an unemployment surcharge at this time.)
- If the state charges an unemployment surcharge, enter the rate.
- State Disability Rate (Only CA, HI, NJ, NY, RI, and PR have state disability withholding that is required to be paid by the employee.)
- Enter the rate of the state disability deduction.
- State Disability Wage Base
- Enter the maximum amount of wages subject to this tax.
- State Max SDI Amount
- Enter the maximum amount that can be withheld from the employee in one year.
- Credit Reduction Rate
- If the client is in a credit reduction state and wishes to track the credit reduction amount (percent of taxable FUTA wages) on the 940 tax deposit, enter the state's credit reduction rate as a percent.
- Family Leave Rate
- Enter the rate of the family leave deduction.
- Family Leave Wage Base
- Enter the maximum amount of wages subject to this tax.
- State Minimum Wage
- Enter the minimum wage set by the state.
Note: If state withholdings are not producing as expected, review your State Rates and Withholding Setup and the employees State Tax setup, located under Employees > Employees Setup > individual employee > State Tax tab.
The Locality tab is used to maintain a database of municipality and school district tax rates. Locality taxes are local taxes needing withheld and are only available with these states: AL, CO, DE, IN, KY, MD, MI, MO, NY, OH, OR, and PA.
Select one of the above listed states and select either School District or Municipality Tax Rate from the Locality Type drop list. Make the appropriate adjustments to the screen and click Save.
To Edit Locality Tax Rates:
- Go to Firm > Rates & Withholding Setup > Locality Setup.
- Select a state from the State drop list.
- This is the client’s state of record for the client’s Employer Identification Number (EIN).
- The grid fills with the locality tax information appropriate to the state selected.
- Locality Type filter
- By default, all locality types for the selected state display. Select the Locality Type from the drop list to filter the displayed list.
- Edit Locality Tax
- If a locality tax changes, locate the affected row, click on the cell to edit, and type the updated information. Click on a column header to sort the displayed list. Click Save when editing is complete.
- Add Locality Tax
- To add a locality tax, click the New icon (). Complete all of the fields regarding the new locality tax.
- Delete Locality
- To delete an entry in the locality tax table, select it by clicking the line in the table, then click the Delete icon ().
Note: Vendors, located under Payables > Vendor Setup, can have Federal and State withholdings configured per vendor. This is done on the Withholding tab of the Vendor Setup window. See Related Articles for additional information regarding Vendor Setup.