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HR and Payroll for Business Central

HR and Payroll for Business Central

Locality Tax Setup Review

Step 1: Create the Payroll Code for the Withholding

  • Full payroll menu
  • Setup Column
  • Payroll Codes
    • + New
    • Set the withholding up with all needed information

Step 2: Set the Posting Setup for G/L Posting

  • Full payroll menu
  • Posting Setup
  • Withholdings / Deductions

Step 3: Set up the Local Tax Rate / and Wage Limit if needed

  • Full payroll menu
  • Periodic Activities column
  • Periodic Processing…
  • Local Tax Rate / Limit Update
    • Options group
      • Action – Add / Modify / Delete
      • Type – Local Tax
      • State Abbreviation
      • Payroll Code – Withholding code created for this taxation
      • Local Tax Code – Additional code for Tax Reporting
      • Local Tax Description – Description of tax code
      • W2 Locality Code – Code to report on the W-2
      • Year effective
      • Effective date will populate based on Year selection
    • Local Tax Percentage
      • Local Tax Type – Locality or School District
      • Tax Percent – percentage of tax (i.e. 1.5% is 1.50)
      • Earnings Lower limit if needed
      • Earnings upper limit if there is a cutoff of taxable earnings
      • Employee Withholding – On for yes, Off for no
      • Employer Tax – On for ER Tax, Off if not
      • State WH Allowances Apply – On if yes
      • Resident Tax – Defines if this is available on Resident box on state card. On for resident. Off for Work Locality.
    • Options Group
    • Local Tax Percentage Group

Once created – you are able to set the local tax on the EE State WH Records

Step 4: Add the withholding to the payroll calculation lines

  • Go to ‘Full Payroll Menu’
  • Setup column
  • Payroll Calc. Formulas
    • Select + New
    • Code to match calc code
    • Type is Withholding
    • Payroll Code – Code created for local tax calc
    • Amount Type – Formula
    • Formula – Local Tax – Work for Work locality tax or Local Tax – Resident for Resident withholding
    • Formula ID and Calculation Sort should populate
    • Make sure the State Filter defaults based on Pay Code setup

Now you are ready to calculate the check and see the withholding populated.

Questions / Resources

If you have questions or comments please email

Find demos, tutorials, and more at our video library.

Last Review:      5/04/2021 – Revision: 0.0

Key Words: Tax, Local

CategoriesPayroll NOW

KB Number: KB15-005

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