I second Terry's answer for changing the Employees Tax Maintenance settings. Set the Federal to Exempt, and set the State like the KB shows with the negative $.01 in Additional Tax Withholding and positive $.01 in Estimated Tax Withholding. My personal recommendation is to not mess with subject to tax settings on paycodes, benefit codes or deduction codes at the employee level, because it causes problems with reconciling what your taxable wages are at 941 and W2 time. Keep those subject to tax settings consistent with the setup level for easier reconciliation processes. The pay is technically subject to tax, but you just don't want withholding from that check. Be sure to set the Employee Tax Maintenance back to what the employee normally has after the special bonus check is cut.
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