Many areas have a local income tax in addition to state or federal withholdings. If you let Sage 50 set up your payroll and you did not copy payroll information from another company, you have the opportunity to set this up in Initial Payroll Field Setup. You are asked to name the default locality, if there is one for your area, and the known percentage taxed. After leaving this window, Sage 50 creates a Local employee payroll field. It also creates a XXLIT formula in user-maintained payroll formulas (where XX is your postal two-letter state abbreviation). Some special LIT calculations are already included in Sage-Maintained Payroll Formulas. These include localities in Colorado, Delaware, Missouri, and New York. If your locality is not in one of these states, then Sage 50 will create a tax formula for you. This will be a generic calculation based on the percentage entered in Initial Payroll Field Setup.
If you skipped this step in the Initial Payroll Field Setup, or copied payroll setup from another company, you may have to create the employee payroll field, create the tax formula, or both on your own. If you have more than one locality, you will have to create a tax formula for each area. These tables should be created in User-Maintained Payroll Formulas.
Note: If your company is located in the states of Alabama, Indiana, Kentucky, Michigan, Ohio, or Pennsylvania, and your locality's income tax has exemptions or a maximum tax, the local formula we created for you may be incomplete. Refer to Sage 50 Online Help "Special Localities" for special instructions on modifying the generic formula created to match these requirements.
To set up a local tax payroll field
Note: You must subscribe to one of the Sage Business Care plans to have access to the payroll formulas and to have payroll taxes calculated within Sage 50. Otherwise, you can set up the payroll field, but you will have to manually calculate and enter the tax amount on the checks.