1 Overview Intent This document describes the US Federal Tax Calculation using the Symmetry Tax Engine (STE) Software. Audience All users who are responsible to do the Payroll Tax Calculation in the Pay cycle process. Prerequisites All users must have a thorough understanding of the Payroll Pay Cycle UPCALC process. 2 Federal Tax Calculation 2.1 General Set Up UDGNIS - this is the process to load all US Tax Jurisdictions into IDCO, IDSP, IDCN, IDCI, IDMN, IDSD, IDZR, IDTX UPUTR - this is the process to load all US Tax Rates and States Miscellaneous Parameters, after UPUTR is run, user can go into IPUTR and IPUTP screen to view the applicable Tax Rates and Miscellaneous Parameters by State IPUTR - user may view US Tax Rates by States and enter the Overridden Rates and Wage Base - user may suppress some SUTA Surcharge Calculation for some States by checking the ‘Do not Calculate’ toggle IPUTP - user may view US Tax Miscellaneous Parameters by States that are applicable for IPRLU screen IDGV - this screen may optionally contain specific override Rates and Wage Bases by Government Registration for each Registration from Pay Header’s Group - IDGV overridden amounts take precedence over the IPUTR overridden amounts IPPC - Pay Components must be set up with applicable IPCU PC Usages for US Taxation IDTX - allows user to enter applicable Tax Jurisdictions that are paid by employees - on IPPH / IEPI, IEAS, IDLN screens etc that requires a Tax Jurisdiction, the user can pop into the ‘Tax Jurisdiction Editor Utility’ Dialog Box to enter the Jurisdiction on IDTX screen IPRLU / IPRULS - each employee must be set up with the applicable Tax Methods - Miscellaneous Tax Parameters must be set up by States that need to be paid UPRLU - this process audits the US Tax Filing Information and generates IPRLU Miscellaneous Tax Parameters information according to IMCT set up IPPH - PAY HEADER Tab must specify the default Work Jurisdiction and Home Jurisdiction - PAY LINES Tab Jurisdiction field must specify the Work Jurisdiction of this Pay Line - after Trial Calc or UPCALC, PAY AMOUNTS Tab contains all US Taxation amounts in summary that are used for the calculation of net pay - PAY JURISDICTION Tab contains the default Work Jurisdiction and Home Jurisdiction - after Trial Calc or UPCALC, PAY JURISDICTION Tab contains all US Taxation amounts by Jurisdictions in detail 2.2 IPUTP – Federal Tax Parameters When UPUTR is run, it loads in a list of Federal Tax Parameters for Symmetry Federal Tax Calculation. On IPUTP screen, the following Federal tax parameters are available to be used on IPRLU / IPRLUS screen. IRS_MAX_EXEMPTIONS These parameters will not automatically be added to IPRLU / IPRLUS by UPRLU process for all employees. Users are required to manually add to IPRLU / IPRLUS for employees who are eligible for each parameter. IRS_MAX_EXEMPTIONS - Optional, numeric, IRS maximum number of exemptions allowed - allows an employer to indicate on the employee’s IPRLU / IPRLUS screen the maximum number of exemptions allowed for this employee as indicated by the IRS in a ‘lock-in-letter’ - UPCALC will cap the employee’s Federal ‘# of exemptions’ with the value from IPRLU / IPRLUS ‘IRS_MAX_EXEMPTIONS’ parameter - any number provided will override the Federal # of exemptions, including 0. - Do not provide a default value 401K_CATCHUP (obsolete, removed from IPUTP) - Optional, character, 401K Limit Catch Up Option - indicates to Symmetry if the employee is enrolled in a 401k Catch up plan - the annual regular 401k contribution limit is defined by the IRS, e.g. $16,500. if the user is enrolled in 401k plan with annual contribution limit greater than this regular limit, this parameter allows the 401k maximum contribution to exceed the IRS limit for Benefit Pre-tax calculation - 'DEFAULT'-Catch Up is not allowed, 'YES'-Catch Up is allowed, 'NO'-Catch Up is not allowed. - If 401K Catch up option is applicable to all employees, user can enter ‘YES’ in IPUTP Default Value, otherwise each employee can specify the value for this option on IPRLU /IPRLUS screen 2.3 IPUTR – Federal Tax Rates When UPUTR is run, it loads in a list of Federal Tax Rates for Symmetry Federal Tax Calculation. - on IPUTR screen, user can select the State = ‘Federal’ to view the Federal Tax Rates. - each Tax Identifier may provide the default Tax Rates, Wage Base to be used for Federal Tax calculation IMPORTANT: - for ER_FUTA Identifier, user MUST enter their own Employer FUTA rate that is provided by the government on the ‘Override Tax Rate’ field, Symmetry requires this FUTA Rate to be passed into the Symmetry Tax Engine, otherwise ER FUTA will not be calculated 2.4 IPRLU – US Tax Filing Information Both IPRLU and IPRLUS screens can be used to Maintain US Tax Filing Information for an employee. IPRLU - contains all US Tax Filing Information for both Vertex and Symmetry Tax users IPRLUS - contains US Tax Filing Information for Symmetry Tax users only - the FEDERAL tab, STATE tab and LOCAL Tab must specify all Tax Methods and eligible information - for Federal Tax Calculation, the ‘# of Exemptions’ must be entered on the FEDERAL Tab, if the employee has an IRS letter to indicate the maximum number of exemptions allowed for this employee, then enter on IPRLU MISCELLANEOUS Tab or IPRLUS STATE Tab with Misc. Identifier ‘IRS_MAX_EXEMPTIONS’ 3 Federal PC Usages 3.1 PC Usage – Federal Tax On IPPC screen, please set up Pay Components for these PC Usages for Federal tax Calculation Usage Description 6001 FWT Deduction - Regular Tax 6002 FWT Deduction - Additional Tax 6003 FWT Deduction - Supplemental Tax 6004 FWT Earnings - Regular Tax 6005 FWT Earnings - Regular Tax 6051 Pre-FWT Earnings - Reg Tax Table Method (PPE) 6052 Pre-FWT Earnings - Reg Tax % Method (PPE) 6053 Pre-FWT 125 Exemption - Reg Tax (PPE) 6054 Pre-FWT 401K Exemption - Reg Tax (PPE) 6055 Pre-FWT Earnings - Supplemental Tax (PPE) 6056 Pre-FWT 125 Exemption - Supplemental Tax (PPE) 6057 Pre-FWT 401K Exemption - Supplemental Tax (PPE) 6058 Pre-FIT Hours - Total Hours worked (PPE) 7901 to Pre-FWT 125 Exemption - Reg Tax (PPE) 7928 Pre-FWT HSA Exemption -Suppl Tax (PPE) 7801 to Pre-Reg Custom Benefit 01 - Reg Tax (PPE) 7830 Pre-Sup Custom Benefit 10 - Suppl Tax (PPE) 3.2 PC Usage – Federal Insurance Contribution Act (FICA) Tax Federal Insurance Contributions Act Tax (FICA) is imposed by the Federal government on both employees and employers. The FICA tax is calculated using Pay Component Usages 6201 – 6261. Usage Description 6201 FICA Employee Deduction 6202 FICA Employee Earnings 6210 FICA Employer Contribution 6211 FICA Employer Earnings 6251 Pre-FICA Employee Earnings (PPE) 6261 Pre-FICA Employer Earnings (PPE) 3.3 PC Usage – Medicare Tax Medicare Tax is an employer and employee paid tax. The Medicare tax is calculated using Pay Component Usages 6501 – 6552. Usage Description 6501 Medicare Employee Deduction 6502 Medicare Employee Earnings 6503 Medicare Employer Contribution 6504 Medicare Employer Earnings 6551 Pre- Medicare Employee Earnings (PPE) 6552 Pre- Medicare Employer Earnings (PPE) 3.4 PC Usage – Federal Unemployment Tax Act (FUTA) Federal Unemployment Tax Act (FUTA) is an employer paid tax. The FUTA tax is calculated using Pay Component Usages 6401 – 6451. Usage Description 6401 FUTA Employer Contribution 6402 FUTA Employer Earnings 6451 Pre-FUTA Employer Earnings (PPE) There are two ways of providing the FUTA tax rate: (1) IPUTR - enter the Rate or Wage Base provided by the Government on the Override fields - these Overrides are applicable for the entire company for the Federal calculations (2) IDGV - if there is a specific rate given by the government for different Registration #, - then enter on IDGV by ‘Reg Type’, this overrides the IPUTR Rate - UPCALC retrieves IDGV by Government Registration from Employee’s Pay Header Group If you do business in a state that has been given a FUTA Tax Credit reduction, the new FUTA tax rate for that particular state may be entered in IDGV for the state. In IDGV add a new entry for the specific state, select Registration Type ‘US SUI Regist 1’, the Govt Rate Type should be ‘US FUTA Rate’. This state specific FUTA rate will be picked up by the UPCALC program when an employee is being paid in that state. 3.5 PC Usage – Railroad Taxation PC Usages 6301 – 6356 4 Federal Tax Calculation 4.1 UPCALC Example - Federal Withholdings IPRLU Federal Filing Status = Single Regular Earnings: = 1923.08 Supplemental Earnings: = 100.00 Pre-Tax Benefits: 125 Plan + 401K Plan + 403B Plan + 457 Plan + Simple IRA Plan 145.89 + 112.54 + 20.84 + 16.18 + 14.97 = 310.42 Prorate Pre-Tax Benefits to Regular and Supplemental Earnings: Reg Earn Pre-Tax Benefit = 1923.08 / 2023.08 * 310.42 = 295.08 Sup Earn Pre-Tax Benefit = 100 / 2023.08 * 310.42 = 15.34 FIT Withholding: PC 8005 FIT Earn = 1923.08 – 295.08 = 1628.00 PC 8015 FSP Earn = 100.00 – 15.34 = 84.66 PC 6000 FIT Tax = Based on PC 8005 $1628.00 = 237.77 PC 6010 FSP Tax = Based on PC 8015 $84.66 x 25% = 21.17 5 FICA / MEDICARE 4.1 FICA Wage < FIT Wage Example Employee works for Regular Employment and Railroad Employment. FICA YTD and RRTA YTD are both used in FICA Calculation. FIT_Wages Usage 6051 Pre FWT Earnings 6676.24 FICA_Wages Usage 6261 Pre-FICA Employer Earnings 6596.13 PC 8005 FIT Earn = FIT_Wages – 125 - 401K = 6676.24 – 200.33 – 239.57 = 6236.34 PC 8039 FICA ER Earn = FICA_Wages – 125 = 6596.13 – 200.33 = 6395.80 (1) FICA ER – No Self Adjust Method PC 7031 FICA ER = FICA ER Earn x 0.062 = 6395.80 x 0.062 = 396.54 PC 7030 Medicare ER = Med ER Earn x 0.0145 = 6395.80 x 0.0145 = 92.74 This employee uses ‘Self-Adjust method’, please see next page. (2) FICA ER – Self Adjust Method FIT_Wages.ctd Usage 6051 Pre FWT Earnings = 6676.24 FIT_Wages.ytd Usage 6051 Pre FWT Earnings = 51747.29 FSP_Wages.ctd Usage 6055 Pre-FIT Suppl Earns = 0 FSP_Wages.ytd Usage 6055 Pre-FIT Suppl Earns = 5700 FICA_Wages.ctd Usage 6261 Pre-FICA Employer Earnings = 6596.13 FICA_Wages.ytd Usage 6261 Pre-FICA Employer Earnings = 51057.92 If FICA Earnings (FICA_Wages.ctd) is different than FIT Earnings (FIT_Wages.ctd), then calculate the difference between the Wages for FICA and FIT (i.e. Usage 6261 – Usage 6051), called this Additional FICA Wages CTD Usage 6261 Pre-FICA Employer Earnings: 6596.13 CTD Usage 6051 Pre FWT Earnings 6676.24 CTD Addn FICA Wages: 6596.13 – 6676.24 = -80.11 (negative means FICA Earn < Pre-FWT Earn) YTD Usage 6261 Pre-FICA Employer Earnings: 51057.92 YTD Usage 6051 Pre FWT Earnings 51747.29 YTD Addn FICA Wages: 51057.92 – 51747.29 = -689.37 (negative means FICA Earn < Pre-FWT Earn) Addn FICA_Wages.ctd = -80.11 FICA.ytdEE = 3459.44 (dedn so far) MEDI.ytd = 809.06 (dedn so far) Addn FICA_Wages.ytd = -689.37 FICA.ytdER = 3459.44 (dedn so far) YTD 125 Total (from YTD) = 1649.91 (prorate to YTD FIT / FSP Wages, i.e. 51747.29 and 5700) YTD 401K Total (from YTD) = 2026.80 (prorate to YTD FIT / FSP Wages, i.e. 51747.29 and 5700) FIT_ben_125.ctd = 200.83 FSP_ben_125.ctd = 0 FIT_ben_125.ytd = 1486.20 FSP_ben_125.ytd = 163.71 (1486.20 + 163.71 = 1649.91) FIT_ben_401K.ctd = 239.57 FSP_ben_401K.ctd = 0 FIT_ben_401K.ytd = 1825.70 FSP_ben_401K.ytd = 201.1 (1825.70 + 201.1 = 2026.80) Calculate FICA Wages for the Year: FIT_Wages.ctd + Addn FICA_Wages.ctd + FIT_Wages.ytd + Addn FICA_Wages.ytd 6676.24 + (-80.11) + 51747.29 + (-689.37) = 57654.05 FSP_Wages.ctd + FSP_Wages.ytd 0 + 5700 = 5700 FICA_Wages_Total = 57654.05 + 5700 = 63354.05 Calculate 125 Exemption for the Year: FICA_125_Total = FIT_ben_125.ctd + FSP_ben_125.ctd + FIT_ben_125.ytd + FSP_ben_125.ytd FICA_125_Total = 200.83 + 0 + 1486.20 + 163.71 = 1850.74 FICA ER Calculation: FICA Taxable Earnings = FICA_Wages_Total – FICA_125_Total FICA Taxable Earnings = 63354.05 – 1850.74 = 61503.31 FICA ER Contribution = FICA Taxable Earnings x FICA Rate FICA ER Contribution = 61503.31 x 0.062 = 3813.21 FICA ER YTD so far = YTD PC 7031 FICA ER + PC 7033 RR Tier1 Soc ER FICA ER YTD so far = 1810.19 + 1649.25 = 3459.44 (FICA.ytdER so far) FICA ER this pay = FICA ER Contribution – FICA ER YTD so far FICA ER this pay = 3813.21 – 3459.44 = 353.77 (RPREGC slight rounding 353.80) Medicare ER Calculation MEDI ER Contribution =: FICA Taxable Earnings x FICA Rate MEDI ER Contribution =: 61503.31 x 0.0145 = 891.80 MEDI ER YTD so far = YTD PC 7030 Medicare ER + PC 7034 RR Tier1 Med ER MEDI ER YTD so far = 423.35 + 385.71 = 809.06 (MEDI.ytd so far) MEDI ER this pay = MEDI ER Contribution – MEDI ER YTD so far MEDI ER this pay = 891.80 – 809.06 = 82.74 (RPREGC slight rounding 82.75) 6 Railroad Tax Calculation 5.1 Railroad – Tier1 Tax Example FIT_Wages Usage 6051 Pre FWT Earnings 6153.82 RRTA_Wages Usage 6306 Pre-RR Tier1 SOC ER Earnings 6079.97 PC 8005 FIT Earn = FIT Wages – 125 - 401K = 6153.82 –194.22 – 225.31 = 5734.29 PC 8201 RR Tier1 Soc ER Earn = RRTA Wages – 125 = 6079.97 –194.22 = 5885.75 (1) RRTA – No Self Adjust Method PC 7033 RR Tier1 Soc ER = RR Tier1 Earn x 0.062 = 5885.75 x 0.062 = 364.92 PC 7034 RR Tier1 Med ER = RR Tier1 Earn x 0.0145 = 5885.75x 0.0145 = 85.34 - For Railroad Taxation, if an employee has FICA contribution during the year, this means the employee works between the Railroad and Non-Railroad Assignments. In this case, please check if the ‘RR Self-Adjust’ Method should be used for this Employee or not. - The reason is, if ‘RR Self-Adjust’ method is defined on IPRLU, this method is applicable for both RR Tier1 and Tier2 calculation, but since Regular FICA does not have a Tier2 calculation, the ‘RR Self-Adjust’ method will automatically re-adjust all Earnings that include YTD FICA Earnings that are not subject to Tier2 calculation, this would cause the entire YTD Earnings to subject to Tier2 tax - since employee should only pay Tier2 tax for the Earnings that are earned for Railroad employment, if employee has FICA contribution, the user should verify if this employee should use the ‘Self-Adjust’ method to re-calculate all Tier2 tax or just to use ‘RR No Self-Adjust’ method. - Next page example shows the ‘RR Self-Adjust method’ and should be used when Employee does not have FICA employment (2) RRTA – Self Adjust Method FIT_Wages.ctd Usage 6051 Pre FWT Earnings = 6153.82 FIT_Wages.ytd Usage 6051 Pre FWT Earnings = 58423.53 FSP_Wages.ctd Usage 6055 Pre-FIT Suppl Earns = 0 FSP_Wages.ytd Usage 6055 Pre-FIT Suppl Earns = 5700 RRTA_Wages.ctd Usage 6306 Pre-Tier1 Soc ER Earn = 6079.97 RRTA_Wages.ytd Usage 6306 Pre-Tier1 Soc ER Earn = 57654.05 If RRTA Earnings (RRTA_Wages.ctd) is different than FIT Earnings (FIT_Wages.ctd), then calculate the difference between the Wages for RRTA and FIT (i.e. Usage 6306 – Usage 6051), called this Additional RRTA Wages CTD Usage 6306 Pre-Tier1 Soc ER Earn : 6079.97 CTD Usage 6051 Pre FWT Earnings 6153.82 CTD Addn FICA Wages: 6079.97 – 6153.82 = -73.85 (negative means RRTA Earn < Pre-FWT Earn) YTD Usage 6306 Pre-Tier1 Soc ER Earn : 57654.05 YTD Usage 6051 Pre FWT Earnings 58423.53 YTD Addn FICA Wages: 57654.05 – 58423.53 = -769.48 (negative means RRTA Earn < Pre-FWT Earn) Addn RRTA_Wages.ctd = -73.85 RRTA.ytd_Tier1_ER = 3813.24 (dedn so far) Addn RRTA_Wages.ytd = -769.48 YTD 125 Total (from YTD) = 1850.24 (prorate to YTD FIT / FSP Wages, i.e. 58423.53 and 5700) YTD 401K Total (from YTD) = 2266.37 (prorate to YTD FIT / FSP Wages, i.e. 58423.53 and 5700) FIT_ben_125.ctd = 194.22 FSP_ben_125.ctd = 0 FIT_ben_125.ytd = 1685.77 FSP_ben_125.ytd = 164.47 (1685.77 + 164.47 = 1850.24) FIT_ben_401K.ctd = 225.31 FSP_ben_401K.ctd = 0 FIT_ben_401K.ytd = 2064.91 FSP_ben_401K.ytd = 204.46 (2064.91 + 204.46 = 2269.37) Calculate RRTA Wages for the Year: FIT_Wages.ctd + Addn RRTA_Wages.ctd + FIT_Wages.ytd + Addn RRTA_Wages.ytd 6153.82 + (-73.85) + 58423.53 + (-769.48) = 63734.02 FSP_Wages.ctd + FSP_Wages.ytd 0 + 5700 = 5700 RRTA_Wages_Total = 63734.02 + 5700 = 69434.02 Calculate 125 Exemption for the Year: RRTA_125_Total = FIT_ben_125.ctd + FSP_ben_125.ctd + FIT_ben_125.ytd + FSP_ben_125.ytd RRTA_125_Total = 194.22 + 0 + 1685.77 + 164.47 = 2044.46 RRTA Tier1 ER Calculation: RRTA Taxable Earnings = RRTA_Wages_Total – RRTA_125_Total RRTA Taxable Earnings = 69434.02 – 2044.46 = 67389.56 RRTA Tier1 ER Contribution =: RRTA Taxable Earnings x RRTA Tier1 ER Rate RRTA Tier1 ER Contribution =: 67389.56 x 0.062 = 4178.15 RRTA ER YTD so far = YTD PC 7031 FICA ER + PC 7033 RR Tier1 Soc ER RRTA ER YTD so far = 2163.99 + 1649.25 = 3813.24 (RRTA.ytdER so far) RRTA Tier1 ER this pay = RRTA ER Contribution – RRTA ER YTD so far RRTA Tier1 ER this pay = 4178.15 – 3813.24 = 364.81