U.S. TAXATION#
U.S. taxation is calculated in the UPCALC (payroll Calculation) process using Annualization Method, Overridden Flat Amount, Percentage Method, or any of the other methods available.Pay components used to store taxation and government calculation results are defined in the Pay Component (IPPC) form with the U.S. pay component usages from the Pay Component Usage (IPCU) form.
Pay elements defined in the (IPPE) form are used to define which pay components are subject to each different tax.
Default tax calculation methods are found on the pay rule (IPRLU) form for each employee.
Pay categories (defined in IPPGU) can override default tax information.
U.S. Federal Tax Calculations #
The Symmetry Tax Engine calculates the Federal tax regardless of the Work and Residence Jurisdiction codes that are passed to it. After the tax engine is called, UPCALC will retrieve the Federal tax results and store into the proper Federal tax pay components.When calculating supplemental pay, you should also pass the 125 and 401K exemption amounts that are applicable for the supplemental gross amount. If the FED SUPPL - 125 and FED SUPPL - 401K elements are zero, the FED TAX - 125 and FED TAX - 401K elements will be prorated to the regular gross and supplemental gross.
U.S. State Tax Calculations #
When calculating the State tax, the tax engine takes into consideration the Work and Residence Jurisdiction codes that are passed and the State Reciprocation. The Work Jurisdiction code of the employee is derived from their primary assignment record (IEAS) that is being paid in the time sheet on the IPPH form. The Residence Jurisdiction code is from the employee’s Personal (IEPI) record, where they live, that is effective for the time sheet. You can override both work and residence jurisdiction for each timeliest on the IPPH form.When UPCALC calls the the tax engine module to calculate the State tax, there is a linkage area for State tax calculation that has 2 buffer areas, one for the Work State area and one for the Residence State area. The the tax engine|the tax engine module calculates the appropriate Work and/or Residence State tax and passes back the 2 buffer areas to UPCALC. UPCALC will then retrieve the State tax results and store into the proper Work State tax pay components and/or the Residence State tax pay components.
The SUI and SDI calculation are always based on the Work Jurisdiction code regardless of whether Residence State tax has been calculated.
When calculating Supplemental Pay, you should also pass the 125 and 401K exemption amounts that are applicable for the supplemental gross amount. If the ST TAX SUPPL 125 and ST TAX SUPPL 401 elements are zero, the ST TAX - 125 and ST TAX - 401K elements will be prorated to the regular State gross and supplemental State gross.
Alternate State Tax Method#
When using an Alternate State Tax Method for AZ the Filing Status and the number of Exemptions for both Federal and State must be the same. Although the Alternate State Methods are a percentage of Federal Tax – separate calculations for Federal and State taxation are calculated. This means that for State Tax the Federal amount is recalculated based on the State Filing Status and Exemptions and the Alternate percentage is then calculated.U.S. Local Tax Calculations#
When calculating the Local County and City tax, the tax engine|the tax engine takes into consideration the Work and Residence Jurisdiction codes. The Work Jurisdiction code of the employee is from the employee’s primary assignment (IEAS) record that is being paid in the time sheet on the IPPH form. The Residence Jurisdiction code is from the employee’s Personal (IEPI) form, where they live, that is effective for the time sheet. You can override both work and residence jurisdiction for each timeliest on IPPH form.When UPCALC calls the the tax engine|the tax engine module to calculate the Local tax, there is a linkage area for Local tax calculation that has 4 buffer areas - 1 for the Work County area, 1 for Work City area, 1 for Residence County area and 1 for the Residence City area. Then the the tax engine|the tax engine module calculates the appropriate Work and/or Residence County and City tax and passes back the 4 buffer areas to UPCALC. UPCALC will then retrieve the County and City tax results and store into the proper Work tax pay components and/or the Residence tax pay components.
The School district tax and Head Tax will be done according to both the Work and Residence Jurisdiction codes and passed back to UPCALC in the appropriate buffer area (mostly in the Residence area).
125 Plan Processing – Cash Option and Non-Cash Option#
If an employee has an option of receiving cash in lieu of the 125 plan benefits, then the tax engine|the tax engine will take into consideration the 125 cash option in calculating SUI and SDI. You should set up a pay component for cash option 125 plan and a pay component for non-cash option 125 plan. Then as the 125 plan contribution is calculated, store the 125 plan amount into the proper cash 125 plan pay component or non-cash 125 plan pay component depending on if the employee elects to receive cash 125 or not.In elements FED TAX - 125, FED SUPPL - 125, ST TAX - 125, ST TAX SUPPL 125, CNTY TAX - 125, CITY TAX - 125, include both the cash 125 pay component and non-cash 125 plan pay component. In element 125 CASH OPT, only include the cash option 125 plan pay component. You may also include the cash option 125 plan pay component in GROSS PAY element if the 125 cash option is paid directly towards the employee’s Pay.
When UPCALC is run, as the 125 CASH OPT has a non-zero value, then the tax engine will take into consideration the 125 plan cash option when calculating the SUI and SDI.
Vacation Pay Processing#
You may override the number of tax weeks on the pay header form to indicate the number of weeks the vacation is being paid. Then the pay header Tax weeks will be taken into consideration with their normal number of tax weeks per pay from the payroll form to come up with a proration factor for the taxable earnings at the federal, state and local levels.The value in the element FED TAX REG EARNS (indicated on the Pay Component with the PC Usage of 6051) is used as the vacation gross to calculate taxation.
If the value of element VACATION EARNS (indicated on the Pay Component with the PC Usage of 6032) is greater than zero then this amount will be stored separately as the Vacation Pay earnings.
All taxable earnings at the federal, state and local levels will be adjusted according to the number of weeks, pro-ration factor before calling the tax engine|the tax engine. On return from the tax engine, all taxes calculated will be stored normally.
Multiple Tax Jurisdiction Processing#
In Wiki , each time sheet (pay header) contains the tax jurisdiction to be used for taxation purposes. Taxes are calculated according to the Pay Header's Work and Home Jurisdiction. One time sheet cannot be paid with multiple tax jurisdictions.If an employee works in multiple tax jurisdictions in one pay period, the employee should have multiple time sheets (Pay Headers) entered into the system. Each time sheet specifies the work jurisdiction the employee works in. The home jurisdiction for these time sheets should be the same assuming the employee has not moved during the pay period.
If the 'Normal Tax Method' is used for multiple time sheets within a pay period, each time sheet will be evaluated on its own and thus resulting in a lower estimated annual income and therefore lower tax amount being withheld.
The user can use the following tax methods for multiple tax jurisdictions:
- Federal Level:Use 'Cumulative Averaging Method' or 'Period To Date (PTD) Method'
- State Level:Use 'PTD' method
- Local Level:Use 'PTD' method
Set Up#
- IPRLU - Federal Tax Method
- Federal Tax Method is from lexicon X_UFED_TAX_METHOD, use one of the following values:
- 10 - PTD Method
- 11 - PTD Method +%
- 12 - PTD Method + Amount
- IPRLU - State Tax Method
- State Tax Method is from lexicon X_UST_TAX_METHOD, use one of the following values:
- 10 - PTD Method
- 11 - PTD Method +%
- 12 - PTD Method + Amount
- IPRLU - Local Tax Method
- County and City Tax Method are from lexicon X_ULOC_COUNTY_TAX_METHOD and X_ULOC_CITY_TAX_METHOD, use one of the following values:
- 10 - PTD Method
- 11 - PTD Method +%
- 12 - PTD Method + Amount
- PTD TAX METHOD PROCESSING
- The 'Period To Date' method is to calculate taxes based on the entire Pay Period Amounts regardless of the number of time sheets the employee is being paid. If an employee is paid with one time sheet for 80 hours, the tax results should be the same as if the employee is paid 2 time sheets for 40 hours each, for the same tax jurisdiction.
- The following steps are used for this method:
- retrieve CTD values of all US PC Usages for this pay
- retrieve PTD values of all US PC Usages for this pay period excluding this pay
- retrieve YTD values of all US PC Usages for this year
- At federal level. CTD/PTD/YTD values are retrieved for all tax jurisdictions.
- At State level, PTD/YTD values are retrieved for the Pay Header's Work State and Home State.
- At Local level, PTD/YTD values are retrieved for the Pay Header's Work Jurisdiction and Home Jurisdiction.
- At federal level, if PTD method is used, the 125 plan and 401K amounts are passed as PTD amount, therefore FICA/MEDI/FUTA will automatically be calculated using the PTD method.
- At State level, if PTD method is used, the 125 plan and 401K amounts are passed as PTD amount, therefore SUI/SDI will automatically be calculated using the PTD method.
- At Local level, if PTD method is used, the 125 plan and 401K amounts are passed as PTD amount, therefore School district tax will automatically be calculated using the PTD method.
Step (2) - accumulate all taxable earnings, tax deductions for this pay period:
- add PTD values to CTD values, these become the new CTD values to call Vertex
- subtract PTD values from YTD values, because PTD are included in CTD, no need to be included in YTD for Vertex
Step (3) - calculate taxes for the entire period:
- call Vertex to calculate tax amounts for the newly adjusted CTD amount for the entire period
- Vertex returns all tax amounts for the entire period
Step (4) - store taxes for current pay :
- from tax results, UPCALC subtracts the PTD amounts of the previous pays to obtain the current pay's tax amount
- store the difference between tax results and PTD amounts in current pay
- IPRLU - EIC Tax Method
- EIC Tax Method is from lexicon X_UFED_EIC_METHOD, use one of the following values:
- 11 - Single (EAS wage)
- 12 - Married (EAS wage)
- 13 - Married, No Spouse (EAS wage)
- These EIC methods will pass the employee's prime assignment annual wage to the tax engine so it will calculate EIC base on prime assignment annual wage instead of deriving from the Current gross being passed.
- Vertex Cumulative Tax Calculation
- Vertex supports the cumulative tax calculation at Federal level. For State and Local level, the user should use 'PTD' method.
- Vertex Cumulative Averaging method accumulates past + current gross and then averages it according to the number of periods so far in current year. If an employee has not been paid at beginning of year or the employee is not paid consecutively, the estimated annual income based on past income will be low. For new hired in middle of year, this method will not project the income accurately.
- However, if the user prefers this Cumulative Averaging Method of annualizing income for Federal calculation, please use this method.
