Client has a scheme which similar to 401k for certain employees. Evey pay cycle certain amount is deducted and sent to a vendor.
When employee is disbursed Vendor pays to the Employee, after with holding Fed, State and local taxes . (Vendor only calculates and Fed and State taxes. Client calculates Local taxes using some software and provides it to the Vendor for withholding).
Employee is issued a W-2 from the Vendor for disbursement he receives.
Client issues W-2 as usual.
Requirement is: Local Taxes should be reported to Client's W-2. This is be a flat dollar amount.
What is a best approach for this?