US Taxation Supplemental Pay Processing
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US TAXATION SUPPLEMENTAL PAY PROCESSING#

Overview#

This document describes the US Supplemental Pay Processing that is used in the Symmetry Tax Engine (STE).

Federal Level#

Federal Supplemental Tax Methods#

Prorating Taxable Benefits for Federal Supplemental Pay#

When a supplemental pay is paid with a regular pay, the taxable benefit deductions can be prorated between both Federal and Supplemental wages. This is controlled by the set up of elements attached to specific pay components, as indicated below.

Prorating the taxable benefit deductions will cause a slight difference in the tax calculated. Organizations will need to consider their business processes to determine if they would prefer the taxable benefits to be prorated or not. Some organizations may want to prorate Section 125 deductions and not 401k deductions.

UPCALC reviews the set up of the following Federal PC Usages to determine if it should prorate the taxable benefit deductions:

7901 Pre-FWT 125 Exemption - Reg Tax (PPE)
7902 Pre-FWT 401K Exemption - Reg Tax (PPE)
7903 Pre-FWT 403B Exemption - Reg Tax (PPE)
7904 Pre-FWT 457 Exemption - Reg Tax (PPE)
7905 Pre-FWT Roth 401K Exemption - Reg Tax (PPE)
7906 Pre-FWT Roth 403B Exemption - Reg Tax (PPE)
7907Pre-FWT FSA Exemption - Reg Tax (PPE)
7908 Pre-FWT HSA Exemption - Reg Tax (PPE)
7909 Pre-FWT Simple IRA Exemption - Reg Tax (PPE)
7921Pre-FWT 125 Exemption - Suppl Tax (PPE)
7922 Pre-FWT 401K Exemption - Suppl Tax (PPE)
7923 Pre-FWT 403B Exemption - Suppl Tax (PPE)
7924 Pre-FWT 457 Exemption - Suppl Tax (PPE)
7925 Pre-FWT Roth 401K Exemption - Suppl Tax (PPE)
7926 Pre-FWT Roth 403B Exemption - Suppl Tax (PPE)
7927 Pre-FWT FSA Exemption - Suppl Tax (PPE)
7928 Pre-FWT HSA Exemption -Suppl Tax (PPE)
7929 Pre-FWT Simple IRA Exemption - Suppl Tax (PPE)

The proration logic will occur when:

The proration logic will NOT occur when:


Set Up Options to Prorate Section 125 Taxable Benefits between Federal and Supplemental:

  1. On IPPC, do not associate an element to 'PC Usage 7921 - Pre-FWT 125 Exemption - Suppl Tax (PPE)'. This will cause UPCALC to prorate all of the Section 125 taxable benefit deductions that are defined in the element tied to 'PC Usage 7901 - Pre-FWT 125 Exemption - Reg Tax (PPE)'.
  2. If only certain Section 125 deductions should be prorated, define an element on IPPE that lists only the Section 125 deductions that should be prorated between Federal and Supplemental. On IPPC, attach this element to the Pay Component tied to 'PC Usage 7921 - Pre-FWT 125 Exemption - Suppl Tax (PPE)'. The element should not be the same as the one associated to the regular Pre-Tax Benefit PC, such as 7901.

Set Up Options to Prorate 401k Taxable Benefits between Federal and Supplemental:

  1. On IPPC, do not associate an element to 'PC Usage 7922 - Pre-FWT 401K Exemption - Suppl Tax (PPE)'. This will cause UPCALC to prorate all of the 401k/457 taxable benefit deductions that are defined in the element tied to '7902 - Pre-FWT 401K Exemption - Reg Tax (PPE)'.
  2. If only certain 401k or 457 deductions should be prorated between Federal and Supplemental, define an element on IPPE that only lists the 401k and 457 deductions that should be prorated. On IPPC, attach this element to the pay component tied to PC Usage '7922 - Pre-FWT 401K Exemption - Suppl Tax (PPE)'.

After UPCALC or Trial Calc, go to the Pay Jurisdiction tab on IPPH, click on the Jurisdiction '00-000-0000 Federal' entry and scroll down the 'Tax Identifier' list. The prorated 125 and 401K amounts are stored for these Benefit usages with the description 'Pre-FWT 125 Exemption - Supplemental Tax (PPE)' etc.

The following is an example of proration:

PC 1010 Regular Earnings2307.6900
PC 2002 Bonus $1000.0000
PC 4020 Medical EE (sect125)50.0000
PC 4041 401K Dedn33.0800
PC 6000 Fed Tax393.2000
PC 6003 Fed Supp Tax243.7200
PC 8000 Fed Tax Earnings2249.7300
PC 8010 Fed Sup Earnings974.8800
PC 6055 Res SIT Tax138.0000
PC 6057 Res Supp Tax61.0000
PC 8055 Res SIT Earnings2249.7300
PC 8058 Res Supp Earnings974.8800
PC 8400 Pre-Fed Earnings2307.6900
PC 8403 Pre-Fed Sup Earnings1000.0000
PC 8153 Pre Fed 125 Earnings34.8800
PC 8154 Pre Fed 401 Earnings23.0800
PC 8156 Pre Fed Sup 12515.1200
PC 8167 Pre FSP 401 Earnings10.0000
PC 8551 Pre-SIT Earnings2307.6900
PC 8453 Pre-SIT Suppl Earnings1000.0000
PC 8353 Pre-SIT 12534.8800
PC 8354 Pre-SIT 401/403/45723.0800
PC 8356 Pre-SIT Supp 12515.1200
PC 8357 Pre-SIT Supp 401K10.0000

UPCALC prorated both Section 125 and 401k taxable benefits against regular and supplemental wages for federal and state.

PC 4020 Medical EE (Section 125) $50.0000

PC 8153 Pre Fed 125 Earnings34.8800 prorated amount on regular wages
PC 8156 Pre Fed Sup 125+ 15.1200 prorated amount on suppemental wages
50.00

PC 4041 401K Dedn $33.0800

PC 8154 Pre Fed 401 Earnings23.0800 prorated amount on regular wages
PC 8167 Pre FSP 401 Earnings+ 10.0000 prorated amount on suppemental wages
33.08

The Pre-Fed Earnings are reduced accordingly:

Pre-Fed Earnings2307.6900
Pre Fed 125 Earnings-34.8800
Pre Fed 401 Earnings-23.0800
Fed Tax Earnings2249.7300

The Pre-Fed Supp Earnings are reduced accordingly:

Pre-Fed Sup Earnings1000.0000
Pre Fed Sup 125- 15.1200
Pre FSP 401 Earnings- 10.0000
Fed Sup Earnings974.8800

The FIT Tax is based on $2249.73
The FSP Tax is based on $974.88

On the Pay Jurisdiction tab on IPPH, click the Jurisdiction '00-000-0000 Federal' entry and scroll down the 'Tax Identifier' list. The prorated Section 125 and 401K amounts are stored as 'Pre-FWT 125 Exemption - Supplemental Tax (PPE)' etc.
The following is an example of the same pay, without proration:

PC 1010 Regular Earnings 2307.6900
PC 2002 Bonus $1000.0000
PC 4020 Medical EE (Section 125)50.0000
PC 4041 401K Dedn 33.0800
PC 6000 Fed Tax 386.9200
PC 6003 Fed Supp Tax250.0000
PC 6055 Res SIT Tax136.0000
PC 6057 Res Supp Tax63.0000
PC 8000 Fed Tax Earnings2224.6100
PC 8010 Fed Sup Earnings1000.0000
PC 8055 Res SIT Earnings2224.6100
PC 8058 Res Supp Earnings1000.0000
PC 8400 Pre-Fed Earnings2307.6900
PC 8403 Pre-Fed Sup Earnings1000.0000
PC 8153 Pre Fed 125 Earnings50.0000
PC 8154 Pre Fed 401 Earnings33.0800
PC 8551 Pre-SIT Earnings2307.6900
PC 8453 Pre-SIT Suppl Earnings1000.0000
PC 8353 Pre-SIT 12550.0000
PC 8354 Pre-SIT 401/403/45733.0800

UPCALC did not prorate the Section 125 or 401k deductions against regular and supplemental wages.

The Pre-Fed Earnings are reduced accordingly:

Pre-Fed Earnings2307.6900
Pre Fed 125 Earnings-50.0000
Pre Fed 401 Earnings-33.0800
Fed Tax Earnings2224.6100

The Pre-Fed Supplemental Earnings are not reduced since the Section 125 and 401k taxable benefits were not prorated.
Pre-Fed Sup Earnings 1000.0000

The FIT Tax is based on $2224.6100
The FSP Tax is based on $1000.0000

State Level#

State Supplemental Pay#



The following table lists the States that are with and without the Supplemental Tax Percent, as of July 2017.

StatePercent StatePercent
Alabama5.0 Montana6.0
Alaska Nebraska5.0
American Samoa25.0 Nevada
Arizona New Hamshire
Arkansas6.9 New Jersey(3)
California6.6
10.23
New Mexico4.9
Colorado4.63 New York9.62(4)
Connecticut North Carolina5.599
Delware North Dakota1.84
Florida Ohio3.5
Georgia(1) Oklamhoma5.0
Guam25.0 Oregon9.0
Hawaii Pennsylvania3.07
Idaho7.4 Puerto Rico
Illinois4.95 Rhode Island5.99
Indiana3.23 South Carolina7.0
Iowa6.0 South Dakota
Kansas5.0 Tennessee
Kentucky Texas
Louisiana Utah
Maine5.0 Vermont(5)
Mariana Islands25.0 Virgin Islands25.00
Maryland(2) Virginia5.75
Massachusetts5.1 Washington
Michigan4.25 West Virginia(6)
Minnesota6.25 Wisconsin(7)
Mississippi Wyoming
Missouri6.0

(1) Georgia rates vary from 2% to 6% based upon the year-to-date gross pay.
(2) Maryland varies based upon the County. The base percentage is 5.75% and the County percentage is added to the base.
(3) New Jersey has no provision, but for pay over $500,000, withhold at 9.9%
(4) New York City residents have an additional supplemental of 4%. Yonkers City residents have an additional supplemental of 1.103%. Non-resident Yonkers additional supplemental is 0.5%.
(5) Vermont rate is 24% of Federal Tax (6) West Virginia rates vary from 3% to 6.5% based upon the year-to-date gross pay.
(7) Wisconsin rate vary from 4.0% to 7.65% based upon the year-to-date gross pay.

State Supplemental Tax - WITH or WITHOUT Regular Pay#

Depending on if the Supplemental wages are paid WITH or WITHOUT the Regular wages, each State may have different methods to handle Supplemental taxes. Please refer to this link for more details:

http://www.payroll-taxes.com/PayrollTaxes/supplemental_states.htm

An example for the state of Maryland below shows the differences of the State Supplemental Tax results when the 'FLAT' or 'CURRAGG' tax methods are used.

Maryland GEO: 24-001-1713506 Allegany
Paid with Regular WagesPaid at Different Time than Regular Wages
Add to regular wages and withhold on totalWithhold at 5.75% plus applicable county of residence rate,

Or add to regular wages, compute tax on total, and subtract the tax withheld on regular wages

The Local Level Supplemental Tax method uses the same State Level Supplemental Tax method

For Example: State of Maryland:

In conclusion for Maryland:

IPUTP - Supplemental Tax Method by State#

When UPUTR is run, it automatically loads in the two Miscellaneous Identifiers for each State, to provide the Default Supplemental Tax Method:

SUP_PAID_WITH_REG
SUP_PAID_WITHOUT_REG

Default Value: should be set to 'FLAT' or 'CURRAGG', depending on each State
Provided By: always set to 'Internal'. When UPCALC is passing the State Misc Parms to Symmetry, UPCALC will not pass the State Misc Parm that are defined as 'Provided By' = 'Internal'.

IPRLU - Supplemental Tax Method by Employee#

At the Employee level, employees can optionally override the default State Sup Tax Method on IPUTP for:
* SUP_PAID_WITH_REG
* SUP_PAID_WITHOUT_REG

If there is no override by an employee, there is no need to set up these Misc Tax Parm.

For the IPRLU Federal and State Tab Suppl Tax Method explanation, please refer to the PR_US_IPRLU_methods_v1.0.doc or later.

When an employee is paid with Supplemental wages, the IPRLU Federal and State Tab Suppl Tax Method determines if the Supplemental Wages are to be taxed or not, and which Suppl Tax Method is to be used.

When the State Supplemental tax is to be calculated by Symmetry, the IPUTP State specific tax method from SUP_PAID_WITH_REG or SUP_PAID_WITHOUT_REG will be passed to Symmetry for calculation, depending on if the Supplemental wages are paid with or without Regular wages (either FLAT or CURRAGG is used).

Prorating Taxable Benefits for State Supplemental Pay#

Like with the Federal Supplemental Pay, taxable benefits can be prorated between regular state wages and supplemental wages when both are paid together. This is controlled by the set up of the elements attached to specific pay components, as indicated below.

Prorating the taxable benefit deductions will cause a slight difference in the tax calculated. Organizations need to consider their business processes to determine if they would prefer the taxable benefits to be prorated or not. Some organizations may want to prorate Section 125 deductions and not 401k deductions.

UPCALC reviews the set up of the following State PC Usages to determine if it should prorate the taxable benefit deductions.
NOTE: If the State Level Benefit PC Usages are not set up on IPPC, then the Federal Level Benefit PC Usages that are described in the Federal section will be used.

7951Pre-State 125 Exemption - Reg Tax (PPE)
7952Pre-State 401K Exemption - Reg Tax (PPE)
7953Pre-State 403B Exemption - Reg Tax (PPE)
7954Pre-State 457 Exemption - Reg Tax (PPE)
7955Pre-State Roth 401K Exemption - Reg Tax (PPE)
7956Pre-State Roth 403B Exemption - Reg Tax (PPE)
7957Pre-State FSA Exemption - Reg Tax (PPE)
7958Pre-State HSA Exemption - Reg Tax (PPE)
7959Pre-State Simple IRA Exemption - Reg Tax (PPE)
7971Pre-State 125 Exemption - Suppl Tax (PPE)
7972Pre-State 401K Exemption - Suppl Tax (PPE)
7973Pre-State 403B Exemption - Suppl Tax (PPE)
7974Pre-State 457 Exemption - Suppl Tax (PPE)
7975Pre-State Roth 401K Exemption - Suppl Tax (PPE)
7976Pre-State Roth 403B Exemption - Suppl Tax (PPE)
7977Pre-State FSA Exemption - Suppl Tax (PPE)
7978Pre-State HSA Exemption -Suppl Tax (PPE)
7979Pre-State Simple IRA Exemption - Suppl Tax (PPE)

The proration logic will occur when:

The proration logic will NOT occur when:


Set Up Options to Prorate Section 125 Taxable Benefits between State Regular Wages and Supplemental:

  1. In IPPC do not associate an element to PC Usage 7971 - Pre-State 125 Exemption - Suppl Tax (PPE). This will cause UPCALC to prorate all of the Section 125 taxable benefit deductions that are defined in the element tied to PC Usage 7951 -Pre-State 125 Exemption - Reg Tax (PPE).
  2. If only certain Section 125 deductions should be prorated, define an element in IPPE that only lists the Section 125 deductions that should be prorated between Federal and Supplemental. In IPPC attach this element to the Pay Component tied PC Usage 7971 - Pre-State 125 Exemption - Suppl Tax (PPE).

Set up Options to Prorate 401k Taxable Benefits between Federal and Supplemental:

  1. In IPPC do not associate an element to PC Usage 7972 - Pre-State 401K Exemption - Suppl Tax (PPE). This will cause UPCALC to prorate all of the 401k/457 taxable benefit deductions that are defined in the element tied to PC Usage 7952 - Pre-State 401K Exemption - Reg Tax (PPE).
  2. If only certain 401k or 457 deductions should be prorated between Federal and Supplemental, define an element in IPPE that only lists the 401k and 457 deductions that should be prorated. In IPPC attach this element to the Pay Component tied to PC Usage 7972 - Pre-State 401K Exemption - Suppl Tax (PPE).

After UPCALC or Trial Calc, on IPPH, 'Pay Jurisdiction' tab, click the Jurisdiction entry for the appropriate Jurisdiction name and scroll down the 'Tax Identifier' list. The prorated Section 125 and 401K/457 amounts are stored for these Benefit usages with the description of 'Pre-State 125 Exemption - Reg Tax (PPE)', etc.

The following is an example of proration:

PC 1010 Regular Earnings2307.6900
PC 2002 Bonus $1000.0000
PC 4020 Medical EE (Section 125)50.0000
PC 4041 401K Dedn 33.0800
PC 6000 Fed Tax 393.2000
PC 6003 Fed Supp Tax 243.7200
PC 8000 Fed Tax Earnings2249.7300
PC 8010 Fed Sup Earnings974.8800
PC 6055 Res SIT Tax138.0000
PC 6057 Res Supp Tax61.0000
PC 8055 Res SIT Earnings2249.7300
PC 8058 Res Supp Earnings974.8800
PC 8400 Pre-Fed Earnings2307.6900
PC 8403 Pre-Fed Sup Earnings1000.0000
PC 8153 Pre Fed 125 Earnings34.8800
PC 8154 Pre Fed 401 Earnings23.0800
PC 8156 Pre Fed Sup 12515.1200
PC 8167 Pre FSP 401 Earnings10.0000
PC 8551 Pre-SIT Earnings2307.6900
PC 8453 Pre-SIT Suppl Earnings1000.0000
PC 8353 Pre-SIT 125 34.8800
PC 8354 Pre-SIT 401/403/457 23.0800
PC 8356 Pre-SIT Supp 12515.1200
PC 8357 Pre-SIT Supp 401K10.0000

UPCALC prorated both the Section 125 and 401k taxable benefits against regular and supplemental wages for both Federal and State.

PC 4020 Medical EE (Section 125) $50.0000
PC 8353 Pre-SIT 12534.8800 prorated amount on reg wages
PC 8356 Pre-SIT Supp 125+ 15.1200 prorated amount on supp wages
50.00

PC 4041 401K Dedn $33.0800
PC 8354 Pre-SIT 401/403/45723.0800 prorated amount on reg wages
PC 8357 Pre-SIT Supp 401K+ 10.0000 prorated amount on supp wages
33.08

The Pre-State Earnings are reduced accordingly:

Pre-SIT Earnings2307.6900
Pre-SIT 125- 34.8800
Pre-SIT 401/403/457- 23.0800
RES SIT Earnings2249.7300

The Pre-Fed Supp Earnings are reduced accordingly:

Pre-SIT Suppl Earnings1000.0000
Pre-SIT Supp 125- 15.1200
Pre-SIT Supp 401K- 10.0000
Fed Sup Earnings974.8800

The SIT Tax is based on $2249.73 The SSP Tax is based on $974.88

The following is an example of the same pay, without proration:

PC 1010 Regular Earnings 2307.6900
PC 2002 Bonus $ 1000.0000
PC 4020 Medical EE (Section 125)50.0000
PC 4041 401K Dedn 33.0800
PC 6000 Fed Tax 386.9200
PC 6003 Fed Supp Tax250.0000
PC 6055 Res SIT Tax136.0000
PC 6057 Res Supp Tax 63.0000
PC 8000 Fed Tax Earnings2224.6100
PC 8010 Fed Sup Earnings1000.0000
PC 8055 Res SIT Earnings2224.6100
PC 8058 Res Supp Earnings1000.0000
PC 8400 Pre-Fed Earnings2307.6900
PC 8403 Pre-Fed Sup Earnings1000.0000
PC 8153 Pre Fed 125 Earnings50.0000
PC 8154 Pre Fed 401 Earnings33.0800
PC 8551 Pre-SIT Earnings2307.6900
PC 8453 Pre-SIT Suppl Earnings1000.0000
PC 8353 Pre-SIT 12550.0000
PC 8354 Pre-SIT 401/403/45733.0800

UPCALC did not prorate the Section 125 or 401k deductions against regular and supplemental wages.

The Pre-State Earnings are reduced accordingly:

Pre-SIT Earnings2307.6900
Pre-SIT 125- 50.0000
Pre-SIT 401/403/457- 33.0800
RES SIT Earnings2224.6100

The Pre-SIT Supplemental Earnings are not reduced since the Section 125 and 401k taxable benefits were not prorated.
Pre-SIT Suppl Earnings $1000.0000

The SIT Tax is based on $2224.6100
The SSP Tax is based on $1000.0000


Notes #

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