Manually Adjusting Tax Withholding for One Paycheck

[BespokeCyclery]

I need to run bonus check and I have discovered how to do this through payroll but for tax purposes I need it to have a significantly different tax rate.  Is there anyway to change tax withholding before running payroll?

[RobynR · Accepted solution]

Hey @BespokeCyclery,

Welcome to the Community!

When the BONUS is used: Taxes will be calculated using the supplemental withholding rate. To learn more about withholding rates, refer to IRS Publication 15 and your state’s employer tax guide.

At this time, Square Payroll does not offer a feature to withhold a specific federal and/or state tax amount from an employee’s paycheck. Taxes are automatically calculated based on the gross pay and the tax information provided on the employee’s W-4 and/or state equivalent form.

While a direct customization feature isn’t available, you may be able to use the steps below to adjust tax withholding through an off-cycle payment or consider making estimated tax payments outside of Square Payroll. We strongly recommend consulting with your tax advisor or accountant to determine the best approach for your needs.

Steps to Adjust Withholding Using an Off-Cycle Payment:

1. Determine Gross Pay and Desired Tax Withholding:

   • Calculate the gross pay and the specific tax amounts you wish to withhold.

2. Adjust Federal Income Tax Withholding (W-4):

   • Go to your employee’s profile and update their W-4 settings:
     • In the Additional Withholding section, enter the custom federal income tax amount you want to withhold.
     • Adjust cumulative income for the year, including wages from the estimated final payroll run.

3. Adjust State Income Tax Withholding:

   • Update the state W-4 equivalent:
     • Enter “99” in the Exemptions box.
     • Enter the specific state tax withholding amount in the Additional Withholding field.
     • Note: In Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah, this option is not available due to set withholding rates.

4. Process an Off-Cycle Payment:

   • Navigate to Payroll > Pay Employees.
   • Select a custom date range (e.g., January 1st to the current date or December 31st).
   • Choose Regular Pay (not supplemental pay) to avoid supplemental tax rates.
   • On the Confirm Withdrawal page, review the pay stub to ensure taxes are withheld correctly.

5. Revert W-4 and State Withholding Settings:

   • After processing the off-cycle payment, update the W-4 and state withholding fields back to their original settings.

By following these steps, you can adjust tax withholdings manually through an off-cycle payment. Again, we recommend consulting with a tax professional to ensure compliance and accuracy.