How to Setup Exempt Employee in Sage 100

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If wages should not reported in Box 1 or Box 16 on W2 form – Create an Earnings Code that is not subject to tax, do the following:

Example below is showing steps for setting up an earnings code that is not subject to Federal and State Withholding taxes (meaning wages will not be reported in Box 1 or Box 16 on the W2 form). Similar steps would apply for any applicable taxes this earnings code is not subject to.

1. Open Payroll, Setup, Earnings Code Maintenance.
2. Create an Earnings Code
3. Select applicable benefit types to accrue and all other necessary criteria.
4. In the Subject to Federal Tax section, select No from the drop down for Withholding.
5. Deselect any applicable Taxes that this earnings code is not subject to (i.e. Employee & Employer FICA & Medicare, Unemployment)
6. Repeat step #4 in the Subject to State Tax and Subject to Local Tax sections (if applicable)
7. Deselect any applicable Taxes that this earnings code is not subject to (i.e.Employee SDI, SUI, LDI, Unemployment, etc..)
8. Click Accept

Use this Exempt earnings code when paying Exempt Employees. You could setup an Auto Earnings so you don’t have to remember which employees are exempt, see related article below.

If the wages must be reported in Box 1 (Fed W/H wages) and Box 16 (State W/H wages) on the W2 form but no Federal or State Withholding tax should be withheld from employees paycheck, do the following:

1. Open Payroll, Main, Employee Maintenance
2. Select applicable employee from look up
3. Click on the Wages tab
4. Click Tax Status button
5. Under the Federal, State &/or Local columns, do the following:
   • In the Override W/H Tax Calc field, select Use Fixed Amount
   • In the Amount field, enter 0.00
6. Click Ok
7. Click Accept