Employee State Taxes

How do I set up and manage employee state tax information?

Purpose: This help guide will show you the information you need to set up state tax withholding and state unemployment insurance information in BambooHR.

Table of Contents

Verify the locations of employees

Accurate location information is crucial for the calculation of state taxes. Be sure to double-check the following details before setting up your employees' state tax withholdings and state unemployment insurance.

Employee Fields

Navigate to Employee Fields in Settings and review Location information. Make sure all locations are named correctly and have the correct address listed. If you have a remote location, make sure it is marked as remote in the location settings. Remote locations will use the employee's home address, so you will need to verify that the home addresses of those employees are correct. 

Job Information table

Once you verify your locations in Settings, it's important to then assign a location to each of your employees under the Job Information Table. BambooHR uses the Location field to determine how to properly tax your employees. You can update this information in bulk using the Power Edit tool or by making individual updates on the employee's Job tab. 

State taxes on the Pay Info tab

Want to enable access for your employees to view or edit their own state tax information? Click here to learn more! Need help filling out federal taxes for your employees? Click here! 

1. State Tax Withholding: Click Location and select Work or Home. An employee's work location should be where they spend the most time working.

  • If selecting Work, the employee's assigned location in the Job Information table on the Job tab will determine which location and the associated address to use when calculating the employee's state tax withholdings.
  • If selecting Home, the employee's home address on the Personal tab will calculate the employee's state tax withholdings.

Depending on which state associates with a specific location, different fields will show up for completion under the Location field: 

  • Filing Status: Based on how the employee completes their state tax withholding form, you will need to use the appropriate state filing status code provided by that state in this field. BambooHR will automatically populate the state's filing codes for you to choose from. This may not apply to every state. 
  • Exemptions: You will enter the number of exemptions that apply to an employee based on their state W-4 in this field. There are a few states where this field is not required by the employee because exemptions do not apply. See the list below of those states. If you have an employee in one of these states or the employee has no exemptions, you should enter 0in the Exemptions field for the employee.
    • Alaska, Arkansas, Arizona, Connecticut, Florida, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Montana, New Hampshire, Nevada, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Virginia, Washington, West Virginia, and Wyoming.
  • Additional Withholding: If a state allows for additional withholding and the employee has elected it on their state W-4, you will enter the number that reflects an additional withholding amount or percentage. If an employee does not have additional withholdings, please enter 0  into this field.
  • Additional Allowances: Certain states allow for tax options that include additional allowances. If an employee is part of a state that allows this and indicates these additional allowances on their state W-4 form, you can enter the number of allowances in this field. Keep in mind this is separate from exemptions.

2. State Unemployment Insurance: Click Location and select Work or Home. An employee's work location should be where they spend the most time working. 

  • If selecting Work, the employee's assigned location in the Job Information table on the Job tab will determine which location and the associated address to use when calculating the employee's state tax insurance.
  • If selecting Home, the employee's home address on the Personal tab will calculate the employee's state tax insurance.
  • If the employee is exempt or needs to be excluded from state unemployment insurance, check the State UI Tax Exempt box.

Please keep in mind that your employee's can only be taxed in one state during a pay period. If an employee moves in the middle of a pay period, you can create an off-cycle payroll to capture the second state tax by splitting the paycheck.

State taxes in the New Hire Packet

When adding a new employee, you can select the employee's State Tax Withholding Location and Unemployment Insurance Location.

Unique tax setups by state

Iowa state withholding

The state of Iowa changed state tax IA W-4 requirements beginning January 1, 2024. The state tax withholding fields are updated on the Pay Info tab and in the New Hire Packet to match the new requirements for employees with a work location in Iowa. If an employee in Iowa has exemptions or additional withholdings, they are now required to enter a dollar amount in those fields. Any existing employees who have a hire date prior to January 1, 2024 are able to view their withholdings in the pre-2024 form. However, they will be required to edit their withholdings in the new version of the state withholding form. 

Montana Filing Status

Due to a change in Montana's MW-4 requirements in effect on January 1, 2024, the Filing Status field is required for employees with a work location in the state of Montana before running payroll. You can choose from the following filing statuses: 

  • Single or married filing separately
  • Married filing jointly or qualifying widower
  • Head of household

If this employee data is incomplete when starting payroll, you will be prompted to update this information before you begin payroll. 

Ohio courtesy taxes

BambooHR Payroll will withhold Ohio state courtesy taxes for your employees in addition to their regular state taxes. If you prefer to collect and pay these courtesy taxes independently, you can manage this setup within Company Tax Settings in Settings > Payroll > Taxes.

Oregon local taxes

If your employees have Oregon listed as their work location and have filled out Employee OPT IN form for Metro Supportive Housing Services Tax (SHS)/Multnomah County Preschool for All Tax (PFA), this section allows you to document the amount they have indicated they would like withheld.

Please note: The amount indicated will override their SHS or PFA tax amount in Payroll.

SOC codes: Alaska, Indiana, Maine, South Carolina, Washington, and West Virginia

If you have employees working in Alaska, Indiana, Maine, South Carolina, Washington, or West Virginia, two populated fields will appear under the State Unemployment Insurance section for you to add the Standard Occupational Classification (SOC) code and category. You must fill out the SOC code and category fields for employees working in these states before opening payroll. 

If your employee is in South Carolina, the dropdown options will populate with the options designated by the state. 

You can also add these fields in the employee's Taxes section in TRAXPayroll. 

Vermont Child Care Contribution Tax

The Vermont Child Care Contribution (VT - Child Care EE & ER) tax allows you to set up your employees to pay part of the tax responsibility. To set this up in BambooHR, navigate to the Settings > Payroll > Taxes. The employer tax rate will default to .44% and will only change if you update the percentage in the Employee Pays field. 

The Employee Pays field is required and will be empty by default. This amount must be a whole number percentage between 0-25. When entering an amount above 0, the tax rate shown in the Tax Rate field adjusts according to the percentage entered (i.e. if you enter 25%, then the tax rate changes from .44% to .33%). Saving this information will activate the employer (VT - Child Care -ER) tax and create an active employee (VT-Child Care - EE) tax in Taxes Settings. If you enter 0, then only the employer (VT - Child Care - ER) tax account is created. You will receive an error if they try to save without entering an amount.

You can remove or end the VT-Child Care-ER tax but please keep in mind this will also remove/end the active employee tax account tied to it as well (VT-Child Care-EE).

What if my state requires local taxes?

Some states require local taxes. Watch this video if you're unsure if your employee requires local taxes. 

The new employer tax rate will automatically populate for applicable taxes. You will be responsible for confirming or updating the tax rate based on what the state has provided to your company.