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Set up courtesy withholding

You can set up the optional service to courtesy withhold residential state income taxes or local taxes for your employees with Gusto. Please note, some states do not withhold on residents who earn wages outside of the state. If that applies to your employee, we will not withhold for their state of residence.

Follow the below steps if your employee's state of residence does not yet exist in your Gusto account. Jump to Step 2 if you have already registered to pay taxes in your employee's state of residence.

Step 1. Register for a withholding ID with the resident state

  1. View the state tax setup article for the employee's state of residence.
  2. Register and obtain a withholding ID for the applicable home tax in the resident state.

Step 2. Elect to withhold home taxes in the resident state

  1. Click the People tab.
  2. Click your employee.
  3. Click the Personal tab.
  4. Scroll down to Home Address, click Manage Home Addresses.
  5. Under Actions click Edit.
  6. Next to Pay Home Taxes, select Yes, Gusto should withhold and pay your employee's home state taxes.
  7. Click Save.

Step 3. Enter a withholding ID for the resident state

  1. Click the Company Details tab.
  2. Next to the employee's resident State Tax Setup, click Edit.
  3. Enter the withholding ID.
  4. The next time you run payroll, we'll withhold any state or local taxes applicable for the employee's state of residence.