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What happens when I mark an employee as exempt in Zenefits Payroll

When an employee is marked in Zenefits Payroll as exempt from a particular tax, Zenefits Payroll will exclude that employee's wages when calculating the company's payments for that tax and when reporting amounts for that tax on the company's returns. If there's an employee-paid portion of the tax (e.g., for Social Security), the employee will not see the tax withheld from their paycheck or on their W-2.

For example, let's say a non-US resident employee with a J-1 work visa is marked as exempt from Social Security taxes in Zenefits Payroll:

  • Zenefits Payroll will not withhold any amounts from their paycheck for Social Security, but will withhold as normal for Federal Income and any applicable state taxes.
  • The company's tax payments won't include any amounts for both the employee and employer-paid portions of Social Security for that employee, but will include amounts for Federal Income and any state taxes for that employee as normal.
  • Zenefits Payroll will not include the employee's wages when reporting Social Security amounts withheld from their coworkers on the company's Form 941 or 944.
  • The employee's W-2 will not include any amounts for Social Security, but will include amounts for other taxes as normal.

Note: Zenefits supports marking employees as exempt from only withholding for Federal Income Tax. Zenefits does not support being exempt from being subject to Federal Income Tax.

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