Last Updated:
Article #: 18506
Overview
Withholding codes (WH. Code) classify certain employee deductions for Form W-2 reporting, state forms, and payroll calculations. Assign a WH. Code on the Deductions tab at Employees > Deductions & Benefits when the deduction requires special handling on the employee’s Form W-2 or on state wage reports.
Important Not every deduction needs a WH. Code. Select <None> unless the deduction type requires a specific code. See Drake Accounting – Entering Payroll Deductions for full deduction setup.
Assign a Withholding Code
-
Go to Employees > Deductions & Benefits and select the Deductions tab.
-
Select the applicable deduction or create one by clicking the New button.
-
Complete Deduction Name, Account, Amount, Ceiling, and State as applicable.
-
In Other Properties, select the WH. Code from the drop list.
-
If the limit field is displayed, enter Gross Income WH Limit (percent) or Disposable Income WH Limit (percent) as applicable.
-
Click Save.
-
Assign the deduction to employees at Employees > Employee Setup > Deductions tab, if not already assigned.
Note If you change a deduction’s WH. Code from <None> to a set value and current-year checks exist without a withhold code, the software may prompt to update those checks. This prompt does not apply to Cafeteria Plan, Family Services, Garnishment, 401K, or Disability Insurance codes.
Withholding Code Reference
| WH. Code | Use for |
|---|---|
| <None> | Standard deductions that do not require a special W-2 or state reporting code |
| 401K | 401(k), 403(b), and similar elective deferrals |
| Cafeteria Plan |
Section 125 cafeteria plan deductions |
| Disability Insurance |
State disability insurance (SDI) and similar mandatory disability deductions |
| Employee Unemployment Insurance |
Employee unemployment insurance contributions |
| Family Services |
Family support and similar deductions subject to disposable income limits |
| Family Leave Insurance Plan (Gross) |
Paid family leave withheld from gross wages |
| Family Leave Insurance Plan (FICA) |
Paid family leave subject to FICA |
| Garnishment | Wage garnishments and child support |
| Maryland State Pickup Amount |
Maryland state pickup amounts |
| Private Disability Insurance Plan Contrib. |
Private disability plan contributions |
| Public Employees Retirement Contrib. |
Public employee retirement contributions |
| Loan Repayment |
Employee loan repayments |
| Transportation Tax |
Transportation-related taxes |
| Workers Benefit Fund |
Oregon Workers’ Benefit Fund and similar |
| Long-Term Care Tax |
Long-term care taxes |
| Child Care Contribution |
Child care contribution taxes |
Code-Specific Behavior
Garnishment (Garnishment)
When Garnishment is selected:
-
Federal, Social Security, and Medicare under Post-Tax Deduction are selected and cannot be cleared.
-
Based on Hours Worked is disabled.
-
The limit field label changes to Disposable Income WH Limit (percent).
Family Services (Family Services)
When Family Services is selected, the limit field label changes to Disposable Income WH Limit (percent).
Disability Insurance (Disability Insurance)
Use for mandatory state disability deductions. If the deduction has a Ceiling greater than zero, the employee-level ceiling may override the state SDI ceiling. See Drake Accounting – Setting up SDI and SDRs and Drake Accounting – State Disability Insurance.
401K (401K)
Use for employee 401(k) deferrals. Do not mark Exempt From 401(k) when WH. Code is set to 401K. See Drake Accounting – 401(k) Plan Setup and Drake Accounting – 401(k) Matching.
Setup Review Notifications
When checking Employees > Setup Review, the validator Deductions have a Withholding Code Assigned lists deductions whose names contain keywords such as 401, SDI, DISABILITY, FLI, UI, MD, CHILD, or GARNISH but do not have a matching WH. Code assigned. Review each deduction and assign the appropriate code.