What's covered in this guide?
Employee tax exemptions
Some employees are legally exempt from one or more payroll taxes — for example, employees on certain non-immigrant visas, or employees of organizations that qualify for specific exclusions. Workforce lets you apply these exemptions on a per-employee basis.
To add or remove exemptions for an employee, go to Staff, open the employee's profile, select the Payroll tab, and scroll to Tax Exemptions. Exemptions take effect on future pay runs — any draft pay runs recalculate automatically when an exemption is saved.
The available exemptions are split into two groups:
Federal
Social Security — The employee's wages are not subject to Social Security tax.
Medicare — The employee's wages are not subject to Medicare tax.
Federal Unemployment (FUTA) — The employee's wages do not count toward the company's FUTA liability.
State
State options appear only when the employee has a relevant state tax jurisdiction assigned. Depending on the state, you may see:
Paid Family and Medical Leave (PFML) — The employee's wages are not subject to state PFML contributions.
State Unemployment (SUI) — The employee's wages do not count toward state unemployment insurance.
Employment Training Tax (ETT) — The employee's wages are not subject to the state employment training tax.
State Disability Insurance (SDI) — The employee's wages are not subject to state disability insurance contributions.
Workers' Compensation — The employee is not covered under the company's workers' compensation policy.
Nonresident alien exemptions
Employees on F-1, J-1, M-1, or Q-1 visas are generally exempt from Social Security, Medicare, and FUTA under IRS rules. To reflect this in Workforce, apply the Social Security, Medicare, and Federal Unemployment (FUTA) exemptions together on the employee's profile.
Federal company exemptions
Two exemptions can be set on your federal tax profile and apply to all employees under that EIN. Go to Payroll > Payroll Settings > Tax Profiles and open the federal tax profile. For a full guide on setting up tax profiles, see Configure Tax Profiles.
FUTA exemption — Marks the company as exempt from Federal Unemployment Tax (FUTA). This applies to certain non-profit organizations under IRS rules.
FICA exemption — Marks the company as exempt from Social Security and Medicare taxes (FICA). This applies to certain religious organizations.
State exemptions
Several states with Paid Family and Medical Leave (PFML) or State Disability Insurance (SDI) programs allow employers to opt out of contributions if they meet certain criteria — typically employing fewer than a minimum number of employees, or offering an approved private plan. These exemptions are set on each state's tax profile under Payroll > Payroll Settings > Tax Profiles.