Editing Employee Tax Exemptions #

This guide covers how an admin marks an employee as exempt from specific taxes in Friday using Edit exemptions on the employee Summary page Taxes section. Users may also describe this as turning off a tax, marking a tax as not applicable, disabling FICA, or excluding an employee from state disability or paid family leave tax.

This is different from claiming exempt on a W-4 or state withholding form. For W-4 withholding changes, use Edit Tax Withholding.

Who Can Do This #

An admin can use the Taxes section when all of the following are true:

• The company has payroll access in Friday
• The admin has permission to edit payroll settings
• The employee is a payroll W-2 employee

The Taxes section is not shown for:

• Contractors
• Time-tracking-only employees
• Admins without payroll settings permission

How to Edit Tax Exemptions #

1. Log in to Friday as an admin.
2. Go to Team.
3. Open the employee.
4. On the employee’s Summary page, locate the Taxes section.
5. Turn on Edit exemptions.
6. Review the acknowledgment message and select I acknowledge.
7. Check or uncheck the applicable taxes.
8. Select Save.

To discard unsaved changes, select Clear, or turn Edit exemptions off.

Acknowledgment Requirement #

Before editing exemptions, Friday requires the admin to acknowledge:

Changes made here must be accompanied by a new withholdings form signed by the employee and retained by the employer in order to remain compliant.

Do not change tax exemptions unless the company has the appropriate signed documentation and is retaining it as required.

Eligible Taxes for Exemption #

Only taxes eligible for exemption for that employee appear in the Taxes section. The list is based on the employee’s applicable jurisdictions and tax setup.

Common examples may include:

• Federal Income Tax
• FICA taxes (Social Security and Medicare)
• State income tax
• State disability insurance
• State paid family leave taxes

Taxes that are not eligible for exemption for that employee are not shown and cannot be toggled here.

Federal Exemptions #

The Federal Exemptions area may include:

• Federal Income Tax
• FICA Taxes (Social Security and Medicare)

FICA Taxes #

FICA taxes are grouped together. Toggling any FICA tax toggles all FICA taxes together so Social Security and Medicare exemption settings stay consistent for the employee.

State Exemptions #

State exemption sections appear by jurisdiction abbreviation, such as:

• NY Exemptions
• CA Exemptions
• Other applicable state sections

A state section appears only when that employee has exemptible taxes in that jurisdiction.

What Does “Exempt” Mean Here? #

In the Taxes section, marking a tax as exempt means that tax should not apply to the employee for payroll calculation purposes, based on the company’s election and supporting documentation.

This is different from:

• Claiming exempt on a W-4 or state withholding form
• Company-level tax registrations or tax account numbers
• Temporary withholding adjustments that do not change whether a tax applies

Tax exemptions control whether a specific tax applies to the employee. They are not a substitute for the employee’s normal withholding form elections.

When Should Tax Exemptions Be Used? #

Use tax exemptions for special employment or coverage situations where an employee is not subject to a particular tax under applicable law or program rules.

Examples:

• Exempt from federal income tax based on valid documentation
• Exempt from certain FICA taxes under an applicable exception
• Exempt from a state disability or paid family leave tax based on coverage or eligibility rules

If you are unsure whether an employee should be exempt, do not change the setting. Contact Friday Support.

When Exemption Changes Take Effect #

• Saved exemption changes take effect as of the current day.
• This widget does not provide a date picker for future-dated or historical exemption changes.
• After saving, later payroll calculations should use the updated exemption settings.

How Tax Exemptions Affect Payroll #

When an employee is marked exempt from a tax:

• That tax is generally not calculated for the employee on subsequent payrolls
• Paystubs and tax totals may change as a result
• Related employer and employee portions may both be affected, depending on the tax

When an exemption is removed:

• The tax generally becomes applicable again starting with the effective date of the change
• Later payrolls may begin withholding or accruing that tax again

After saving, review a test or upcoming payroll to confirm the expected result.

What If a Tax Is Missing From the List? #

If a tax does not appear under Federal or state exemptions, it is usually because:

• The tax is not eligible for exemption for that employee
• The employee is not subject to that jurisdiction
• The employee’s payroll tax profile does not include that tax
• The tax must be handled through a different setup process

A missing tax in this section does not necessarily mean the tax is waived. It may simply mean the tax cannot be toggled from the Taxes widget. Contact Friday Support if a needed tax does not appear or cannot be updated.

Best Practices #

• Use Edit exemptions only when a tax should not apply to the employee.
• Obtain and retain a signed withholdings form before changing exemptions.
• Confirm the employee’s work location and applicable jurisdictions before making changes.
• Review the next payroll after saving changes.
• Contact Friday Support for complex exemption setup questions in Friday.