Federal Tax Exempt Updates

To continue our goal of keeping payroll easy and tax compliant, we’ve updated how to mark employees exempt from federal taxes.

What’s Changing?

Pay Info Tab
Instead of checking the box to ignore the federal filing status on the employee’s profile (Pay Info tab > Taxes > Federal Tax Withholding) and mark them as tax-exempt, you’ll now select Yes or No under the new question, “Does federal tax withholding apply to this employee?” The Account Owner, Full Admin(s), Payroll Admin(s), and customer access users with access will be able to update this information on the employee profile. Employees can also update this on their own when given access to the Pay Info tab within Access Level settings.

Improvements for FUTA and FICA exemptions
Because FUTA and FICA are employer-related taxes, the option to designate the employee as exempt from those taxes is only available to Full Admin and Payroll Admin access levels. If the employee is marked FICA exempt and has access to View their Pay Info tab, a message will display explaining how their FICA exemption will affect their paystub. If they are FUTA exempt, no message will appear as this only applies to the employer.

BambooHR Paystub
The BambooHR paystub and paystub preview now include a section under 'Your Tax Withholding (W4) Info for this check' that indicates whether an employee is federally tax-exempt with the label 'Withholding: Exempt'. For custom federal tax withholding, it shows the withholding amount as either a dollar or a percent. However, the TRAXPayroll paystub continues to use the term 'Ignore' to signify that an employee is exempt from federal tax withholding.

As always, we love your feedback! To provide product feedback on this feature and more, head over to our product feedback page and let us know how we’re doing.