Owners and officers on payroll can be taxed differently from other employees. Freedom needs two things from you: whether the person owns more than 2% of the company, and the answers to questions that some states ask. The 2% question matters most for S corporations.
Shareholders who own more than 2%
Go to People and open the employee.
Click the "Tax Setup" tab. It appears only when the employee has extra tax details to fill in.
Find the question about owning more than 2% of the company and answer it. This question appears only for S corporations and single-member LLCs. Count stock owned by the person's spouse, children, and grandchildren as the person's own.
Click "Save Changes".
If you don't see the "Tax Setup" tab, or your company is another type of business, you don't need to answer this.
The answer changes how the person's benefits are taxed, so answer only if you know. If you are not sure, leave it unanswered and ask your accountant. The employee's profile shows "Owns more than 2% of the company" with your answer, or "Not answered" if you haven't chosen one.
When you add a new employee, the same question appears as the "2% shareholder status" step. Choose "Yes" or "No", or choose "Skip" and set it later on the "Tax Setup" tab.
Corporate officers and other state settings
Go to People and open the employee.
Click the "Tax Setup" tab. Settings are grouped by state.
Select a setting, enter or choose the value, and click "Save Changes".
Which settings appear depends on the states where the employee lives and works. Some states ask whether the person is a corporate officer (Delaware, Massachusetts, Washington, and Wyoming) or a family member of the owner (Michigan). Find the setting in that state's section. Others ask about a state-specific exemption or a local tax. If the employee has no "Tax Setup" tab, or a state shows no settings, you don't need to enter anything for this employee.
Company-wide exemptions
There is no setting for a company-wide exemption, such as a nonprofit that is exempt from federal unemployment tax or a company that is not liable for a tax in one state. Contact support in the app chat or at [email protected] and send the agency letter that confirms the exemption.