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City Tax Data

City tax data is established at the time the accession personnel action is processed or when an employee changes duty-station city or residence city.

City tax data is required in the following cases:

  • If the employee's exemption status (marital status and/or number of exemptions) is required in the computation of the tax
  • If the employee is exempt from withholding
  • If the employee authorized additional withholding
  • If the employee reduces the tax withholding by estimating a percentage of work performed outside the duty-station city
  • If the employee is voluntarily electing city tax

This section will show how to enter data for an employee who (1) claims exemption from city tax withholding, (2) voluntarily elects city tax withholding, (3) authorizes an additional withholding amount, (4) establishes the city tax Total Number of Allowances (if applicable), or (5) declares that more than 25 percent of annual compensation is for services performed outside the city.

Before beginning, the following information is needed (as provided by the employee on the City Tax Exemption Claim Form):

  • City Tax
  • State Code
  • City Code
  • Whether or not employee is a resident of the city where employed
  • (Optional data entry) Percent of Annual Compensation the employee claims for services performed outside the city
  • Total Number of Allowances employee is claiming
  • (Optional data entry) Other Allowances - the amount of additional dollars and cents the employee wishes to be withheld

A new tax certificate may be processed at any time to change an employee’s tax information. If the employee’s duty station or residence changes and the new local tax location has an agreement with treasury for mandatory withholding, a new tax certificate should be processed. All previously processed exemptions, additional withholdings, etc., will be removed and must be reprocessed, if applicable. If a new tax certificate is not processed, PPS will begin withholdings at the highest taxable rate if the duty station has a mandatory tax withholding agreement.

Voluntary Withholding

Several taxing entities that do not have agreements with the Secretary of the Treasury have been established in the database for voluntary tax withholding. Tax data must be processed for these entities for taxes to be withheld. Voluntary withholding is based on residence. An employee may voluntarily elect to pay tax based on residence if:

  • The residence city, county, or State is established in TMGT.
  • The mandatory duty-station tax is waived (if allowed).
  • The residence tax locality on the tax form agrees with the residence tax locality of the duty-station.

Additional Withholding

Employees may authorize an amount to be withheld from their salary each pay period in addition to the amount automatically withheld in accordance with the income tax formula. Most exemption certificates allow for additional withholding. This dollar amount is entered in the Additional Amount field of the applicable income tax certificate.

Waiver/Exemption from City Income Tax Withholding

If the city ordinance contains provisions which allow an employee to waive or claim exemption from the tax, an exemption certificate or Form FMS-7311, Employee's Withholding Certificate for Local Taxes, must be processed indicating the employee is not liable for the tax.