1. Create two Benefit records to adjust state wages (box 16) and local wages (box 18):
    1. In Configuration, Benefits, click the down arrow next to New Employer Contribution Benefit and select New Non-Cash Benefit.
    2. On the New Non-Cash Compensation Benefit screen, enter a Benefit ID and description such as ADJ-ST.
    3. Select Federal taxes in the View tax settings for drop-down list and change the Withholding Setting for all tax settings to Do not withhold or report and FUTA to Not subject to FUTA.
    4. Select State taxes in the View tax settings for drop-down list. Change the Withholding Setting for State income tax to Report only, no withholding, and SUTA and SDI to Not subject to SUTA or SDI respectively.
    5. Select Local taxes in the View tax settings for drop-down list. Change the Withholding Setting for For this benefit to Do not include earnings in any local taxes.
    6. On the GL Distribution tab, enter the account distribution by selecting Debit (DR) distribution and Credit (CR) distribution from the Distribution drop-down list.
      Note: Historic entries have a status of Do Not Post and will not affect General Ledger accounts selected.
    7. Click Save and Close.
    8. If the W-2 includes local wages, in Configuration, Benefits, click New Non-Cash Benefit.
      If the W-2 does not include local taxes, go to B.
    9. On the New Non-Cash Compensation Benefit screen, enter a Benefit ID and description such as ADJ-LOC.
    10. Select Federal taxes in the View tax settings for drop-down list. Change the Withholding Setting for all tax settings to Do not withhold or report and FUTA to Not subject to FUTA.
    11. Select State taxes in the View tax settings for drop-down list. Change the Withholding Setting for State income tax to Do not withhold or report, and SUTA and SDI to Not subject to SUTA or SDI respectively.
    12. Select Local taxes in the View tax settings for drop-down list. Change the Withholding Setting for For this benefit to Report earnings only for all local taxes.
    13. On the GL Distribution tab, enter the account distribution by selecting Debit (DR) distribution and Credit (CR) distribution from the Distribution drop-down list.
    14. Click Save and Close.


     
  2. Zero out the existing state and local tax amounts:
    1. Run the W-2 and note the amounts in boxes 16 through 19.
      Note: If state wages (box 16), state income tax (box 17), local wages (box 18), and local income tax (box 19) are already zero (W-2 boxes are blank), go to C.
    2. In Records, Employees, open the Employee record.  On the menu bar, select Employee, Add Historic Entry.
    3. On the Historic Entry screen (shown below), enter a period ending date and pay date within the calendar year for the W-2.
      Example: Enter 12/31/2009 to correct the 2009 W-2.
      Note: The bank information is needed to create a Do Not Post transaction to record the adjustment on the employee Activity tab; the transaction is not recorded in the bank register. Because the historic entry transaction has a status of Do Not Post, it will not affect General Ledger accounts.
    4. In the Payment Details section (shown below), highlight Taxes and select the state income tax ID displaying on the W-2 from the Tax Type drop-down list.
    5. In the Employee W/H field, enter the amount from the state income tax W-2 box (box 17) as a negative number, which will decrease the state income tax amount.
    6. On the next line, select the local income tax ID displaying on the W-2 from the Tax Type drop-down list, if appropriate.
    7. In the Employee W/H field, enter the amount from the local income tax W-2 box (box 19) as a negative number, which will decrease the local income tax amount.
    8. Highlight Benefits and select the state wages adjustment benefit ID from the Benefit ID drop-down list.
    9. In the Amount field, enter the amount from the state wages, tips, etc.W-2 box (box 16) as a negative number, which will decrease the state wages and tips amount.
    10. On the next line, select the local wages adjustment benefit ID from the Benefit ID drop-down list, if appropriate.
    11. In the Amount field, enter the amount from the local wages, tips, etc. W-2 box (box 18) as a negative number, which will decrease the local wages and tips amount.
    12. Save and close the Historic Entry record.
    13. Run the W-2 to verify the amounts in boxes 16 through 19 are now zero or blank.


     
  3. Create the state and local tax records:
    1. In Configuration, Taxes, select State taxes from the Tax type drop-down list, and click New Tax.
    2. Select the appropriate state from the Add new state tax setting for drop-down list and click OK.
    3. Enter the State ID number, W/H pay stub ID, and an effective date of January 1, [W-2 calendar year]. 
      Example: Enter 01/01/2009 to correct the 2009 W-2.
    4. Verify the tax rates and settings are correct for the state.
    5. Click GL Distribution and define the debit and credit accounts for State W/H, SUTA, and Employer Tax.
    6. Click Save and Close.
    7. In Configuration, Taxes, select Local taxes from the Tax type drop-down list, if appropriate.
    8. Click New Tax.
    9. On the Configure a New Local Tax screen, select the appropriate state from the drop-down list and click Next.
    10. Follow the steps to define the responsible parties and tax type, and click Create Local Tax.
    11. On the Add new local tax screen, enter the required information and define the tax rates.
    12. Click GL Distribution and define the credit account.
    13. Click Save and Close.


     
  4. Add the state and local municipality to the Employee record:
    1. In Records, Employees, open the Employee record, and select the Tax Settings tab.
    2. Highlight State Income Tax Settings and click New State Income Tax.
    3. Select the state income tax state and define the appropriate information. The fields to define will vary based on the configuration of the tax.
    4. Click Save and Close.
    5. On the Tax Settings tab, highlight Local Tax Settings and click New Local Tax, if appropriate.
    6. Select the local income tax state and define the appropriate information. The fields to define will vary based on the configuration of the tax.
    7. Click Save and Close.


     
  5. Add the correct state and tax amounts:
    1. In Records, Employees, open the Employee record.  On the menu bar, select Employee, Add Historic Entry.
    2. On the Historic Entry screen (shown below), enter a period ending date and pay date within the calendar year of the W-2.
    3. Select the bank account and payment method, and enter the payment number.
    4. In the Payment Details section (shown below), highlight Taxes and select the correct state income tax ID from the Tax Type drop-down list.
    5. In the Employee W/H field, enter the correct state income tax (box 17) amount as a positive number, which will increase the state income tax amount.
    6. On the next line, select the correct local income tax ID from the Tax Type drop-down list, if appropriate.
    7. In the Employee W/H field, enter the correct local income tax (box 19) amount as a positive number, which will increase the local income tax amount.
    8. Highlight Benefits and select the state wages adjustment benefit ID from the Benefit ID drop-down list.
    9. In the Amount field, enter the correct state wages (box 16) amount as a positive number, which will increase the state wages amount.
    10. On the next line, select the local wages adjustment benefit ID from the Benefit ID drop-down list, if appropriate.
    11. In the Amount field, enter the correct local wages (box 16) amount as a positive number, which will increase the local wages amount.
    12. Save and close the Historic Entry record.
    13. Run the W-2 to verify the state and amounts in boxes 16 through 19 are correct.