Wiki: US Self Adjust Tax Method

Self Adjust Tax Method for Symmetry Tax Engine#

Set Up#

IPRLU – US Tax Filing Set Up#

IPRLU or IPRLUS – Federal Tab#

At the Federal Level, the following Tax Types can be set up with ‘Self-Adjust Method’ or ‘No Self-Adjust Method’

FICA employee and employer calculation
Medicare employee and employer calculation
FUTA employer calculation
Railroad Tier1 and Tier 2 RRTA employee and employer calculation
Railroad Tier1 Medicare employee and employer calculation
Railroad RUIA employer calculation

IPRLU or IPRLUS – State Tab#

At the State Level, the following Tax Types can be set up with ‘Self-Adjust Method’ or ‘No Self-Adjust Method’

SUI EE employee calculation
SUI ER employer calculation, this is also called ER SUTA calculation in Symmetry
SDI EE employee calculation
SDI ER employer calculation

When the ER SUTA Tax Method = ‘Self Adjust’, if a State has ER_SUTA_SC surcharge entries on IPUTR for that State, since the ER_SUTA and ER_SUTA_SC earnings are using the same Subject Earnings, the ER_SUTA_SC surcharge will also be ‘Self Adjust’

IPUTR – US Tax Rates Set Up#

IPUTR must specify the Tax Rate or Override Tax Rate to be used for both the ‘Self-Adjust method’ and ‘No Self-Adjust method’ at the Federal level, and for all applicable States that will be paid by the company at the State level

UPUTR loads in all applicable default Tax Rates, user may enter the Override Tax Rates if applicable

If the Override Tax Rate is specified, this rate will be used, otherwise the default Tax Rate will be used

If the Override Tax Rate is specified as 0.00, then the tax amount will be used with rate of 0.00, therefore it will result with zero tax for the entire calendar year

For FUTA and SUTA, user must manually specify the Override Tax Rate because the government provides each company with their FUTA and SUTA tax rate, Symmetry will not use the default Tax Rate

If the Wage Base or Override Wage Base is specified, then the annual earnings will be capped at this Wage Base

If the Tax Limit Amount is not loaded by UPUTR, and if the Wage Base or Override Wage Base are not zero, then the Annual Tax Limit will be derived from the Wage Base or Override Wage Base multiply by the Tax Rate or Override Tax Rate, the annual tax amount will be capped at this Tax Limit Amount

IDGV – Government Rates Set Up#

On IDGV, user may specify the Override Tax Rate by IDGR Government Registration to override the IPUTR Tax Rate set up

This provides capability for users to set up different Tax Rates for each IDGR Registration

Purpose of Self Adjust#

‘Self Adjust’ and ‘No Self Adjust’ definition#

‘Self Adjust’ Definition

The ‘Self-Adjust’ method evaluates the YTD Earnings and YTD tax amounts every pay to ensure they are consistent and correct at each pay with a given tax rate until all Subject Earnings reach the Annual Maximum Earnings. This facilitates the accurate tax information for the monthly, quarterly reporting and the annual year-end report of W2

At each pay, when user is verifying the Pay Register’s Subject Earnings, the Subject Earnings is derived from current pay’s earnings less taxable benefits

At each pay, when user is verifying the Pay Register’s tax result, the tax amount is the result of the current pay’s Subject Earnings multiply by rate and the adjusted YTD tax amount

Therefore user must verify from both the YTD value and CTD value, it is not just Subject Earnings * Rate

‘No Self Adjust’ Definition

The ‘No Self-Adjust’ method does not evaluate the YTD Earnings and YTD tax amounts every pay, it takes the CTD Subject Earnings multiply by the rate until all Subject Earnings reaches the Annual Maximum Earnings. This ensures the Annual Maximum Earnings and Deductions are capped and allowing multiple rates to be used for a tax type. This facilitates the accurate tax information for the monthly, quarterly reporting and the annual year-end report of W2

At each pay, when user is verifying the Pay Register’s Subject Earnings, the Subject Earnings is derived from current pay’s earnings less taxable benefits

At each pay, when user is verifying the Pay Register’s tax result, the tax amount is the result of the current pay’s Subject Earnings multiply by rate

Self-Adjust Scenarios#

There are many scenarios users are required to perform Adjustments to correct the YTD amounts

For example:
1. Change of Earnings Element set up, e.g. user forgets to include a pay component in the Pre-Earnings Element

2. Change of Benefits Element set up, e.g. user forgets to include a pay component in Pre-Benefits Element, i.e. 125 or 401K

3. Negative YTD Benefit amount, e.g. an Adjustment pay is refunding 125 plan or 401K for rehired employee

4. When paying a Hand Check, e.g. a hand check is issued quickly with some estimated amounts, then user expects UPCALC to use Self-Adjust methods to calculate the correct tax amounts in the following pay

5. Employee is changed from Exempt Employment to Non-Exempt Employment, or vice versa

For client conversion, Self-Adjust method ensures the tax amounts are correct according to the YTD Subject Earnings after conversion

Under most circumstances, when an employee is paid regularly without any error or any set up changes, the ‘Self-Adjust’ method will not be adjusting any tax amounts

If there are mistakes in a pay or changes of set up for Earnings or Benefits elements, user must correct the YTD values with ADJUSTMENT pays for the YTD Subject Earnings prior to using the ‘Self Adjust’ method in the following pay to take into effect

After the YTD Adjustment, the Self-Adjust methods will be calculating according to the YTD amounts, thus ensuring the employee’s Subject Earnings and tax amounts are correct for the quarterly reporting and year end reporting of W2

For more detail of YTD Adjustments process, please read PR_US_Adjustment_Pay

Self-Adjust Example#

Pay 1 – Regular pay#

Employee is paid the first pay in year 2012, UPCALC Pay Register shows the Subject Earnings of FUTA, Medicare, FICA are correct after applying 125 plan, 401K, Custom benefits and Imputed income

IPRLU FUTA, Medicare and FICA are calculated with Self Adjust Methods, for this first pay of the year, tax results are simply equal to Subject Earnings * Rate

6030 Medicare EE 35.34 (correct)
8031 Med EE Earns 2437.52 2437.52 * 0.0145 = 35.34

6031 FICA EE 102.38 (correct)
8037 FICA EE Earns 2437.52 2437.52 * 0.042 = 102.38

7030 Medicare ER 35.34 (correct)
8035 Med ER Earns 2437.52 2437.52 * 0.0145 = 35.34

7031 FICA ER 151.13 (correct)
8039 FICA ER Earns 2437.52 2437.52 * 0.062 = 151.13

7032 FUTA ER 12.57 (correct)
8027 FUTA EARN 2095.05 2095.05 * 0.006 = 12.57

UPCLOZ is run and YTD records are created for 2012

Then suppose a mistake was made in this pay with some earnings and taxable benefits, therefore an Adjustment Pay is issued to correct the YTD Subject Earnings and taxable benefits

Please see below for the YTD Adjustments, then after the Adjustment pay, when a regular pay is paid, the Self-Adjust method will adjust FUTA, FICA, Medicare contributions

Pay 2 – Adjustment pay#

- Assume Regular Earnings was overpaid by 200.00, Supplemental Earnings was overpaid by 100, therefore negative earnings are entered as Reg Earns = -200.00, Sup Earns = -100.00

- Assume 125 plan and 401K plan were over deducted, therefore negative 125 and 401K are entered to refund the employee, 125 plan = -20.00, 401K = -10.00

- in this Adjustment pay, the Subject Earnings are adjusted as follow:

8005 FIT EARN -180.00 8015 FSP EARN -90.00

FIT Earn = Reg Earn – Benefits portion of Reg Earn FSP Earn = Fsp Earn – Benefits portion of Fsp Earn Total Pre-tax Benefits for Fed tax= 125 plan + 401K = -20 + (-10) = -30 Benefits portion of Reg Earn = Reg Earn / (Reg Earn + Sup Earn) * Taxable Benefits = -200 / (-200 + -100) * -30 = -200 / -300 * -30 = -20 FIT Earn = -200 – (-20) = -180 (correct)

Benefits portion of Sup Earn = Sup Earn / (Reg Earn + Sup Earn) * Taxable Benefits = -100 / (-200 + -100) * -30 = -100 / -300 * -30 = -10 FSP Earn = -100 – (-10) = -90 (correct)

8027 FUTA EARN -280.00 FUTA Earn = (Reg Earn + Sup Earn) – 125 plan = (-200 + -100) – (-20) = -300 – (-20) = -280 (correct)

8031 Med EE Earns -280.00 = similar to FUTA Earn 8035 Med ER Earns -280.00 = similar to FUTA Earn 8037 FICA EE Earns -280.00 = similar to FUTA Earn 8039 FICA ER Earns -280.00 = similar to FUTA Earn

- after UPCLOZ, the YTD amounts will be adjusted to reflect this Adjustment pay

3001 125 Plan 152.22 + (-20) = -132.22 (correct) 3002 401K Plan 127.31 + (-10) = -117.31 (correct)

8005 FIT EARN 2024.41 + (-180.00) = 1844.41 (correct) 8015 FSP EARN 0 + (-90.00) = -90 (correct) 8027 FUTA EARN 2095.05 + (-280.00) = 1815.05 (correct) 8031 Med EE Earns 2437.52 + (-280.00) = 2157.52 (correct) 8035 Med ER Earns 2437.52 + (-280.00) = 2157.52 (correct) 8037 FICA EE Earns 2437.52 + (-280.00) = 2157.52 (correct) 8039 FICA ER Earns 2437.52 + (-280.00) = 2157.52 (correct)

Pay 3 – Regular pay - Self-Adjust FUTA / FICA / MEDI#

A regular pay is paid after the YTD Adjustments.