One of your employees may request to be considered exempt from income tax withholding. This means they do not want their employer to withhold any federal income tax and/or specific state income tax from their wages. If you receive such a request, follow these steps to ensure compliance with IRS and state regulations:

 

Verify and Collect W-4 Forms

Before proceeding, ensure the employee meets the IRS criteria for tax-exempt status. To qualify, the employee must:

• Have had no federal income tax liability in the prior year.
• Expect to have no federal income tax liability in the current year.

In order to maintain their tax exempt status, your employee must submit a new Form W-4 each year, and mark that they should be tax exempt. Those W-4 forms may be collected and managed within Greenshades or may be collected outside of Greenshades. 

Collecting W-4 Forms using Greenshades

If your organization is using Greenshades to collect and manage W-4 forms for your employees, then there are two ways to collect those W-4 forms.

First, if you are using the Onboarding functionality within GreenEmployee, then your employees will be automatically prompted to complete their Federal W-4 form as part of their first day Onboarding process. 

If your employee is not completing their Onboarding workflows, then they may still use GreenEmployee to complete their W-4 form by using GreenEmployee, selecting "Documents" from the menu, and then "W-4".  They will then be prompted to complete a new Federal W-4 form as well as any state W-4 equivalent documents that apply.

Once your employee has completed their W-4 form, their tax exempt status should be automatically updated within the system. You can still verify that this exempt status has been registered for Payroll by following the steps in the "Marking an Employee as Tax Exempt for Payroll" section below.  

 

Collecting W-4 Forms using Greenshades

If you are collecting W-4 Forms outside of Greenshades, then you will progress to the section below and follow the steps to Mark the employee as Tax Exempt for Payroll. 

 

Marking an Employee as Tax Exempt for Payroll

You may use the following steps in order to mark (or verify) an employee as tax-exempt within Greenshades Payroll. 

From the Employee List on Greenshades Online, search for the employee in question: 

 

Once done, click on the employee's name to bring up their employee card and choose Payroll -> Tax Parameters from the left side menu. This will bring up all known Tax Parameters for the employee in question.

To see the employee's current exempt status, locate the "Federal Income Tax" section, and look for the value next to "Exempt".

To change this status, click the edit icon in the top of that section, and then use the dialogue to check the "Exempt" box. and then click the "Save" button to save the chages.

 

If the employee has tax exposure in other states (based on their work location), then this same page will have other sections related to each of those states. If those states allow employees to register an exempt status then there will also be "Exempt" items for those states. You may edit and update those exempt statuses by following the same procedure as above, except using the state sections instead of the Federal Income Tax section.