The following tax methods are supported:

Tax method typeDescription
OPTIMIZEDSelects the most appropriate tax rate by estimating annual earnings based on earnings in the current month. This is the best approach to use as a default.
FLATApplies a flat tax of 22% on the first $1M and 37% on the excess (for tax year 2023).
AGGREGATIONApplies an aggregated tax rate based on prior or current payroll wages. May exceed the flat rate of 22% for high wage-earners.

When submitting payments to contractors, no tax method is used, since no taxes are calculated for these payments. Specify the OPTIMIZED method in these cases.