Payroll Calculating Other Withholding Taxes

To calculate an employee's other withholding taxes, the system uses the information on the Payroll Other Taxes form in conjunction with the information on the Employee Information form. The following example walks you through the entire process:

 

  1. On the Tax Code section of the Other Taxes form (Payroll>System Setup>Taxes>Other Taxes), select the "Other Taxes Employee Paid" checkbox.
  2. On the Employee Taxes section:
    • Select a Calculation Basis for the withholding tax. For example, if you select Taxable Earnings, then the system uses—as the basis for the tax calculation—the earnings, benefits, and deductions used in the employee's timesheet that are flagged as subject to other withholding tax.
    • Select the Calculation Type which best fits the withholding tax needed. For this example, on the Employee Rate Table, select Percent of Annual Wages with Cap Option. Enter 0005 for Percent, 12,000 in the Taxable Amount Under field, and select Current in the Calculation Method field. This tells the system how to calculate the withhold tax. (Please note that the Other Taxes Rate Tables page contains a complete example of the Percent of Annual Wages with Cap Option tax.)
    • In the Exemptions/Deductions table, list all possible exemptions/deductions that can be applied to this tax. Again for this example, add an exemption/deduction that has an annual amount of $125.

  3. Finally, on the Other Taxes section of the Employee Information form (see Employee Information), assign all applicable Other Taxes codes that apply to the designated employee. To include exemptions/deductions for the employee, select the appropriate Exemptions/Deductions codes from the Other Tax form; then enter the number of each exemption/deduction the employee should take.

In this example, on the Employee Information form, select the Percent of Annual Wages with Cap Option Other Tax code that you created. Then select the deduction that was set up in the last bullet in step two: $125. If you select that exemption, and then enter 2 in the Number column of the Exemptions/Deductions table, you are giving the employee $250 total annual deductions.

 

User Process

Once you have entered this information, when you calculate the employee's pay, the system calculates the employee's withholding tax. The calculation will be done separately for each Tax Code that is assigned to the employee.

Tax Codes can be Employee Paid, Employer Paid, or they can be paid by both. Employee paid Tax Codes will have a Tax Type of (LWT) and Employer Paid Codes will have a Tax Type of (LER) for reporting purposes and for making adjustments in Review Modify Calculated Payroll, Setup Adjust Employee Balances and Enter Manual Checks. If a Tax Code is paid by both Employee and Employer then both Tax Types will apply in the system.

The system will provide several Calculation Types designed to accommodate a number of tax calculation methods. Select a method from the following list to view the steps:

Employee Paid Calculation Types:

The Annual Base Tax method is used if the other withholding tax formula is a set amount for each pay period.

To calculate the tax, divide the Base Tax (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section) by the number of periods in the pay cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group) and withhold result.

[Base Tax / Pay Cycles]

The Annual Tiered Tax method is used for other withholding tax formulas where rates change based on income levels. This method includes a maximum amount of taxable earnings option; enter an amount in the Taxable Amount Under field. If the other tax should not have a maximum enter a large number, such as 999, 999,999,999.99, in the Taxable Amount Under field.

The following steps walk you through the entire process:

  1. Calculate the Annualized Gross Taxable Earnings - Determine the Gross Taxable Earnings using the earnings, benefits, and deductions in the timesheet. in
    • the Payroll>System Setup>Taxes>Other Taxes>Other Tax Code Details section, enter a tax code, title, and select Applicable Taxes Employee check box.
    • On the Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section, select a Calculation Basis.
      • Select Taxable Earnings to only use codes which are subject to other withholding tax.
      • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
      • Select State Withholding to use codes which are subject to both state and other withholding taxes.
    • Add earnings and benefits then subtract deductions.
    • Annualize the result by multiplying the Gross Taxable Earnings by the number of periods in the Pay Cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group).
  2. Calculate Annualized Taxable Wages - Determine the exemption and deduction amounts to subtract from the Annualized Gross Taxable Earnings to get the Annualized Taxable Wages.
    • Assign the Other Taxes Tax Code and any Additional Withholding. Then select the corresponding Exemptions/Deductions Code and Number in the Payroll>System Setup>Employee Information>Employee Profile>Taxes>Other Taxes section. Note that the Exemptions/Deductions are entered on an annualized basis.
    • Multiply the Exemptions/Deductions Number (Payroll>System Setup>Employee Information>Employee Profile>Taxes>Other Taxes ) by the Exemptions/Deductions Annual Amount (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section).
    • Subtract that amount from the Annualized Gross Taxable Earnings to get the Annualized Taxable Wages.
  3. Calculate the Annualized Other Withholding Tax - Apply the Rate Table to the Annualized Taxable Wages to get the Annualized Other Withholding Tax.
    • Locate the line in the rate table to which the Annualized Taxable Wages applies. The applicable line in the Employee Rate Table will be the one having a Taxable Amount Under value that is greater than the Annualized Taxable Wages.
  4. Calculate Preliminary Current Other Withholding Tax.
    • Divide the Annualized Other Withholding Tax by the number of periods in the Pay Cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group).
  5. Withholding Tax Cap Check - Compare the Total YTD Tax to the Maximum Annual Tax.
    • Total YTD Tax = YTD Accrued Tax + Preliminary Current Other Withholding Tax
    • Maximum Annual Tax = {(Taxable Amount Under – Exclusions) x Percent} + Base Tax
      • If the Total YTD Tax is less then the Maximum Annual Tax then the cap has not been exceeded and the Preliminary Other Withholding Tax is final for the calculation.
      • If the Total YTD Tax is equal to or greater than the Maximum Annual Tax then the Preliminary Other Withholding Tax must be adjusted so that the Total YTD Tax is equal to but does not exceed the Maximum Annual Tax.
  6. Apply Withholding Tax Cap and Recalculate Tax.
    • To get the Other Withholding Tax, subtract the YTD Accrued Tax from the Maximum Annual Tax.
    • The YTD Accrued Tax is all of the taxes recorded for the employee based on the other tax code from year-to-date.
      • If the result is negative, then no tax is assessed.
      • Current Subject wages will be capped so that the Total YTD Subject Wages do not exceed the last Taxable Amount Under entered in the Employee Rate table.

The Annual Tiered Tax with Cap Option method is used for other withholding tax formulas where rates change based on income levels. This method includes a maximum amount of taxable earnings option; enter an amount in the Taxable Amount Under field. If the other tax should not have a maximum enter a large number, such as 999, 999,999,999.99, in the Taxable Amount Under field.

The following steps you through the entire process:

  1. Calculate the Annualized Gross Taxable Earnings - Determine the Gross Taxable Earnings using the earnings, benefits, and deductions in the timesheet.
    • In the Payroll>System Setup>Taxes>Other Taxes>Other Tax Code Details section, enter a tax code, title, and select Applicable Taxes Employee check box.
    • On the Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section, select a Calculation Basis.
      • Select Taxable Earnings to only use codes which are subject to other withholding tax.
      • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
      • Select State Withholding to use codes which are subject to both state and other withholding taxes.
    • Add earnings and benefits then subtract deductions.
    • Annualize the result by multiplying the Gross Taxable Earnings by the number of periods in the Pay Cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group).
  2. Calculate Annualized Taxable Wages - Determine the exemption and deduction amounts to subtract from the Annualized Gross Taxable Earnings to get the Annualized Taxable Wages.
    • Assign the Other Taxes Tax Code and any Additional Withholding. Then select the corresponding Exemptions/Deductions Code and Number in the Payroll>System Setup>Employee Information>Employee Profile>Taxes>Other Taxes section. Note that the Exemptions/Deductions are entered on an annualized basis.
    • Multiply the Exemptions/Deductions Number (Payroll>System Setup>Employee Information>Employee Profile>Taxes>Other Taxes by the Exemptions/Deductions Annual Amount (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes).
    • Subtract that amount from the Annualized Gross Taxable Earnings to get the Annualized Taxable Wages.
  3. Calculate the Annualized Other Withholding Tax - Apply the Rate Table to the Annualized Taxable Wages to get the Annualized Other Withholding Tax.
    • Locate the line in the rate table to which the Annualized Taxable Wages applies. The applicable line in the Employee Rate Table will be the one having a Taxable Amount Under value that is greater than the Annualized Taxable Wages.
  4. Calculate Preliminary Current Other Withholding Tax.
    • Divide the Annualized Other Withholding Tax by the number of periods in the Pay Cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group).
  5. Withholding Tax Cap Check - Compare the Total YTD Tax to the Maximum Annual Tax.
    • Total YTD Tax = YTD Accrued Tax + Preliminary Current Other Withholding Tax
    • Maximum Annual Tax = {(Taxable Amount Under – Exclusions) x Percent} + Base Tax
      • If the Total YTD Tax is less then the Maximum Annual Tax then the cap has not been exceeded and the Preliminary Other Withholding Tax is final for the calculation.
      • If the Total YTD Tax is equal to or greater than the Maximum Annual Tax then the Preliminary Other Withholding Tax must be adjusted so that the Total YTD Tax is equal to but does not exceed the Maximum Annual Tax.
  6. Apply Withholding Tax Cap and Recalculate Tax.
    • To get the Other Withholding Tax, subtract the YTD Accrued Tax from the Maximum Annual Tax.
    • The YTD Accrued Tax is all of the taxes recorded for the employee based on the other tax code from year-to-date.
      • If the result is negative, then no tax is assessed.
      • Current Subject wages will be capped so that the Total YTD Subject Wages do not exceed the last Taxable Amount Under entered in the Employee Rate table.

Calendar Month Wage Threshold Period - The following periods will be available for determining the taxing period:

  • Calendar Month
  • Calendar Year
  1. Determine the Period Schedule - The period schedule will be based on the calendar year. The calendar year will be divided into either 1 period (Calendar Year) or 12 periods (Calendar Month) depending on which Wage Threshold Period was selected.
  2. Calculate the Current Gross Taxable Earnings - Determine the Gross Taxable Earnings using the earnings, benefits and deductions in the timesheet. These are the taxable earnings associated with the current Check Only.
    • In the Payroll>System Setup>Taxes>Other Taxes>Other Tax Code Details section, enter a tax code, title, and select Applicable Taxes Employee check box.
    • On thePayroll>System Setup>Taxes>Other Taxes>Employee Taxes section, select a Calculation Basis.
      • Select Taxable Earnings to only use codes which are subject to other withholding tax.
      • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
      • Select State Withholding to use codes which are subject to both state and other withholding taxes.
    • Add earnings and benefits then subtract deductions.
  3. Calculate the PTD Accrued Gross Taxable Earnings - These are the accrued Subject Earnings for the Month in which the check's Pay Date falls.
  4. Calculate the PTD Gross Taxable Earnings - Add the Current Gross Taxable Earnings to the PTD Gross Taxable Earnings.
  5. Accrue the Base Tax - Determine if the PTD Gross Taxable Earnings is greater than or equal to the Wage Threshold and then determine if the Base Tax has been accrued.
    • If the PTD Gross Taxable Earnings is greater than or equal to the Wage Threshold, verify that the Base Tax has not be accrued.
      • If the Base Tax has been accrued, then the calculation is complete and no tax is due.
      • If the Base Tax has not been accrued, then accrue the Base Tax.

Note: Subject Wages will always equal Gross Subject Wages in this method.

The Percent of Annual Wages with Cap Option method is used for if the other withholding tax formula has a single withholding rate. This method includes a maximum amount of taxable earnings option; enter an amount in the Taxable Amount Under field. Two calculation methods apply to the Percent of Wages – Current and Year To Date.

This method calculates tax based on the current check only. It does not consider year-to-date accrued taxes.

  1. Calculate the Annualized Gross Taxable Earnings - Determine the Gross Taxable Earnings using the earnings, benefits, and deductions in the timesheet.
    • In the Payroll>System Setup>Taxes>Other Taxes>Other Tax Code Details section, enter a tax code, title, and select Applicable Taxes Employee check box.
    • On the Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section, select a Calculation Basis.
      • Select Taxable Earnings to only use codes which are subject to other withholding tax.
      • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
      • Select State Withholding to use codes which are subject to both state and other withholding taxes.
    • Add earnings and benefits then subtract deductions.
    • Annualize the result by multiplying the Gross Taxable Earnings by the number of periods in the Pay Cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group).
  2. Calculate Annualized Taxable Wages - Determine the exemption and deduction amounts to subtract from the Annualized Gross Taxable Earnings to get the employee's Annualized Taxable Wages.
    • Assign the Other Taxes Tax Code and any Additional Withholding. Then select the corresponding Exemptions/Deductions Code and Number in the Payroll>System Setup>Employee Information>Employee Profile>Taxes>Other Taxes section. Note that the Exemptions/Deductions are entered on an annualized basis.
    • Multiply the Exemptions/Deductions Number (Payroll>System Setup>Employee Information>Employee Profile>Taxes>Other Taxes section) by the Exemptions/Deductions Annual Amount (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section).
    • Subtract that amount from the Annualized Gross Taxable Earnings to get the Annualized Taxable Wages.
  3. Calculate the Annualized Other Withholding Tax - Multiply the Percent (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section) by the Annualized Taxable Wages to get the Annualized Other Withholding Tax.
  4. Calculate Preliminary Current Other Withholding Tax.
    • Divide the Annualized Other Withholding Tax by the number of periods in the pay cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group).
      • If an amount is entered in the Taxable Amount Under field, then a maximum amount of taxable earning applies.
      • If no amount is entered in the Taxable Amount Under field, then the Preliminary Current Other Withholding Tax is the Final Current Other Withholding Tax and the Current Subject Wages will equal the Gross Taxable Earnings and the calculation is complete.
  5. Calculate the Preliminary Current Subject Wages - Divide the Annualized Gross Taxable Earnings by the number of periods in the pay cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group).
  6. Withholding Tax Cap Check - Compare Total YTD Subject Wages to the Taxable Amount Under field using Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section.
    • Total YTD Subject Wages = YTD Accrued Subject Wages + Preliminary Current Subject Wages.
      • If the Total YTD Subject Wages is less than the amount in the Taxable Amount Under field then the cap has not been exceeded and the Preliminary Current Other Withholding Tax and the Preliminary Current Subject Wages are final completing the calculation.
      • If the Total YTD Subject Wages is equal to or greater than the amount in the Taxable Amount Under field then the Preliminary Current Subject Wages and the Preliminary Current Other Withholding Tax must be adjusted so that the Total YTD Subject Wages is equal to but does not exceed the amount in the Taxable Amount Under field.
  7. Apply the Subject Wage Cap and Recalculate Tax.
    • First calculate the Final Current Subject Wages - Subtract YTD Accrued Subject Wages from the amount in the Taxable Amount Under field to get the Final Current Subject Wages.
    • Finally, calculate the Final Current Other Withholding Tax - Multiply the Final Current Subject Wages by the Percent (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section) to get the Final Current Other Withholding Tax.

This method bases the tax calculation on a Year to Date approximation and adjusts the current withholding tax to match what the tax should be according to the approximation. This method will adjust for preceding checks that may have excluded withholding tax because the Annualized Gross Taxable Earnings was less then the Exemptions/Deductions amount. This method is also less likely to over withhold for the year when there is a maximum amount of taxable earnings as it will adjust the final tax calculation to match the Maximum Annual Tax when the maximum amount is reached.

First, determine if the current calculation exceeds the maximum amount of taxable earnings.

  1. Withholding Tax Cap Check - Compare Total YTD Subject Wages to the Taxable Amount Under field using Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section:
    • Total YTD Subject Wages = YTD Accrued Subject Wages + Preliminary Current Subject Wages.
    • Preliminary Current Subject Wages = Gross Taxable Earnings (for purposes of this calculation).
      • If the Total YTD Subject Wages is less than the amount in the Taxable Amount Under field then the system will proceed through the normal YTD calculation process.
      • If the Total YTD Subject Wages is equal to or greater than the amount in the Taxable Amount Under field then the cap has been exceeded. Next apply the subject wage cap and calculate the withholding tax.
  2. Apply the Subject Wage Cap and Calculate Tax:
    • First, calculate the Final Current Subject Wages: Subtract YTD Accrued Subject Wages from the amount in the Taxable Amount Under field to get the Final Current Subject Wages.
    • Next, calculate the Maximum Annual Tax: Multiply the amount in the Taxable Amount Under field by the Percent (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section).
    • Finally, calculate the Current Other Withholding Tax: Subtract YTD Accrued Tax from the Maximum Annual Tax.

    3. Then, proceed through the normal YTD calculation process.

  3. Calculate the Annualized Gross Taxable Earnings - Determine the Gross Taxable Earnings using the earnings, benefits, and deductions in the timesheet.
    • In the Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section, select a Calculation Basis.
      • Select Taxable Earnings to only use codes which are subject to other withholding tax.
      • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
      • Select State Withholding to use codes which are subject to both state and other withholding taxes.
    • Add earnings and benefits then subtract deductions.
    • Annualize the result by multiplying the Gross Taxable Earnings by the number of periods in the Pay Cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group>Group section).
  4. Calculate Annualized Taxable Wages - Determine the exemption and deduction amounts to subtract from the Annualized Gross Taxable Earnings to get the Annualized Taxable Wages.
    • Assign the Other Taxes Tax Code and any Additional Withholding. Then select the corresponding Exemptions/Deductions Code and Number in the Payroll>System Setup>Employee Information>Employee Profile>Taxes>Other Taxes section. Note that the Exemptions/Deductions are entered on an annualized basis.
    • Multiply the Exemptions/Deductions Number (Payroll>System Setup>Employee Information>Employee Profile>Taxes>Other Taxes section) by the Exemptions/Deductions Annual Amount (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section).
    • Subtract that amount from the Annualized Gross Taxable Earnings to get the Annualized Taxable Wages.
  5. Calculate Current Taxable Wages - Divide the Annualized Taxable Wages by the number of periods in the pay cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group) to get the Current Taxable Wages.
  6. Calculate Current Exemptions/Deductions - Add all of the Exemptions/Deductions (located on the Payroll>System Setup>Taxes>Other Taxes form) and divide the by the number of periods in the pay cycle for the employee’s processing group (Payroll>System Setup>Payroll Codes>Processing Group>Group section>Pay Cycle) to get the Current Exemptions/Deductions.
  7. Calculate YTD Factor - Divide the YTD Accrued Subject Wages by the Annualized Gross Taxable Earnings to get the YTD Factor.
  8. Calculate YTD Current Exemptions/Deductions - Multiply the Current Exemptions/Deductions by the YTD Factor to get the YTD Current Exemptions/Deductions.
  9. Calculate Total YTD Taxable Wages - Add YTD Accrued Subject Wages and Current Taxable Wages less YTD Current Exemptions/Deductions to get the Total YTD Taxable Wages.
  10. Calculate Total YTD Tax - Multiply Total YTD Taxable Wages by the Percent (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section) to get the Total YTD Tax.
  11. Calculate Current Other Withholding Tax - Subtract the Total YTD Tax from the YTD Accrued Tax to get the Current Other Withholding Tax.
  • Calculate the Current Gross Taxable Earnings - Determine the Gross Taxable Earnings using the earnings, benefits, and deductions in the timesheet.

    • Note: These are the taxable earnings associated with the current Check Only.

    1. In the Payroll>System Setup>Other Taxes>Tax Code section, enter a tax code, title, and select Applicable Taxes Employee check box.
    2. On the Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section, select a Calculation Basis.
      • Select Taxable Earnings to only use codes which are subject to other withholding tax.
      • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
      • Select State Withholding to use codes which are subject to both state and other withholding taxes.
    3. Add earnings and benefits then subtract deductions.
  • Calculate Current Tax - Multiply the Percent (Payroll>System Setup>Taxes>Other Taxes>Employer Taxessection) by the Current Gross Taxable Earnings to get the Current Tax.
    • If Capping does not apply, then this amount will be the final withholding amount.
  • Determine the Pay Cycle Accrued Tax - Accrued tax is the accumulated taxes accrued during the Pay Cycle period immediately preceding the Pay Date of the check.
    • Determine the Pay Cycle period based on the Pay Cycle associated with the Processing Group that the employee is attached to. Then accumulate the accrued tax for that period.
  • Calculate the Total Pending Tax - [Current Tax + Pay Cycle Accrued Tax]
  • Determine if Capping Applies - [Pay Cycle Cap - Total Pending Tax] IF > or = 0 Capping does not apply, Withhold Current Tax.
    • Determine the applicable Pay Cycle Cap by matching the Pay Cycle for the employee to the Pay Cycle specified for the Tax Code then use the associated Pay Cycle Cap Amount.
    • Subtract Total Pending Tax from the Pay Cycle Cap.
    • If the result is positive or zero then the cap does not apply.
    • Withhold the Current Tax.
  • Apply the Pay Cycle Cap - [Pay Cycle Cap - Total Pending Tax IF < 0 Capping applies] THEN [ Pay Cycle Cap – Pay Cycle Accrued Tax = Withholding]
    • Subtract the Pay Cycle Accrued Tax from the Pay Cycle Cap.
    • Withhold the result.

    • Note: Subject Wages will always equal Gross Subject Wages in this method.

    Employer Paid Calculation Types

    Calendar Month Wage Threshold Period - The following periods will be available for determining the taxing period:

    • Calendar Month
    • Calendar Year
    1. Determine the Period Schedule - The period schedule will be based on the calendar year. The calendar year will be divided into either 1 period (Calendar Year) or 12 periods (Calendar Month) depending on which Wage Threshold Period was selected.
    2. Calculate the Current Gross Taxable Earnings - Determine the Gross Taxable Earnings using the earnings, benefits and deductions in the timesheet. These are the taxable earnings associated with the current Check Only.
      • In the Payroll>System Setup>Taxes>Other Taxes>Other Tax Code Details section, enter a tax code, title, and select Applicable Taxes Employer check box.
      • On the Payroll>System Setup>Taxes>Other Taxes>Employer Taxes section, select a Calculation Basis.
        • Select Taxable Earnings to only use codes which are subject to other withholding tax.
        • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
        • Select State Withholding to use codes which are subject to both state and other withholding taxes.
      • Add earnings and benefits then subtract deductions.
    3. Calculate the PTD Accrued Gross Taxable Earnings - These are the accrued Subject Earnings for the Month in which the check's Pay Date falls.
    4. Calculate the PTD Gross Taxable Earnings - Add the Current Gross Taxable Earnings to the PTD Gross Taxable Earnings.
    5. Accrue the Base Tax - Determine if the PTD Gross Taxable Earnings is greater than or equal to the Wage Threshold and then determine if the Base Tax has been accrued.
      • If the PTD Gross Taxable Earnings is greater than or equal to the Wage Threshold, verify that the Base Tax has not be accrued.
        • If the Base Tax has been accrued, then the calculation is complete and no tax is due.
        • If the Base Tax has not been accrued, then accrue the Base Tax.

      6. Note: Subject Wages will always equal Gross Subject Wages in this method.

    The Fixed Amount calculation method is only applicable to Employer paid tax codes and consists of simply assessing a fixed amount of expense on each check. The amount entered is the amount that will be assessed.

    The Percent of Wages with Cap Option method is used if the other withholding tax formula has a single withholding rate. This method includes a maximum amount of taxable earnings option; enter an amount in the Taxable Amount Under field. Two calculation methods apply to the Percent of Wages – Current and Year To Date.

    This method calculates tax based on the current check only and wages are not annualized. It does not consider year-to-date accrued taxes.

    1. Calculate the Current Taxable Earnings: Determine the Gross Taxable Earnings using the earnings, benefits, and deductions in the timesheet.
      • In the Payroll>System Setup>Taxes>Other Taxes>Other Tax Code Details section, enter a tax code, title, and select Applicable Taxes Employer check box.
      • On the Payroll>System Setup>Taxes>Other Taxes>Employer Taxes section, select a Calculation Basis.
        • Select Taxable Earnings to only use codes which are subject to other withholding tax.
        • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
        • Select State Withholding to use codes which are subject to both state and other withholding taxes.
      • Add earnings and benefits then subtract deductions.
    2. Calculate Current Tax - Multiply the Percent (Payroll>System Setup>Taxes>Other Taxes>Employer Taxes section) by the Current Taxable Earnings to get the Current Tax.
      • A Maximum Annual Subject Wages cap will apply if a value is entered in the Taxable Amount Under field.
      • If no value is entered in the Taxable Amount Under field, then the Current Tax is the final Current Tax and the Current Subject Wages will equal the Gross Taxable Wages and the calculation is complete.
    3. Subject Wage Tax Cap Check - Compare Total YTD Subject Wages to the Maximum Annual Subject Wages.
      • Total YTD Subject Wages = YTD Accrued Subject Wages + Current Subject Wages.
      • Maximum Annual Subject Earnings = Taxable Amount Under value for the applicable line in the rate table.
        • If the Total YTD Subject Wages is less than the Maximum Annual Subject Wages then the Current Tax and the Current Subject Wages are final and the calculation is complete.
        • If the Total YTD Subject Wages is greater than the Maximum Annual Subject Wages, then the cap has been exceeded and the cap must be applied. Also, the Current Tax and Current Subject Wages must be recalculated subject to the cap.
    4. Apply the Subject Wage Cap and Recalculate Tax:
      • First, calculate the Final Current Subject Wages: Subtract YTD Subject Wages from the Maximum Annual Subject Earnings.
      • Finally, calculate the Final Current Tax: Multiply the Final Current Subject Wages by the Percent (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section).

    This method considers year to date accrued taxes when calculating the tax and will apply the cap based on how much tax has accrued instead of on how much subject wages have accrued as is the case in the Current Method.

    1. Calculate the Current Taxable Earnings - Determine the Gross Taxable Earnings using the earnings, benefits, and deductions in the timesheet.
      • In the Payroll>System Setup>Taxes>Other Taxes>Other Tax Code Details section, enter a tax code, title, and select Applicable Taxes Employer check box.
      • On the Payroll>System Setup>Taxes>Other Taxes>Employer Taxes section, select a Calculation Basis.
        • Select Taxable Earnings to only use codes which are subject to other withholding tax.
        • Select Federal Withholding to use codes which are subject to both federal and other withholding taxes.
        • Select State Withholding to use codes which are subject to both state and other withholding taxes.
      • Add earnings and benefits then subtract deductions.
    2. Calculate Current Tax - Multiply the Percent (Payroll>System Setup>Taxes>Other Taxes>Employer Taxessection) by the Current Taxable Earnings to get the Current Tax.
      • A Maximum Annual Tax cap will apply if a value is entered in the Taxable Amount Under field.
      • If no value is entered in the Taxable Amount Under field then the Current Tax is the final Current Tax and the Current Subject Wages will equal the Gross Taxable Wages and the calculation is complete.
    3. Annual Tax Cap Check: Compare Total YTD Accrued Tax to the Maximum Annual Tax.
      • Total YTD Accrued Tax = YTD Accrued Tax + Current Tax.
      • Maximum Annual Tax = Taxable Amount Under value plus the Percent in the rate table.
        • If the Total YTD Tax is less than the Maximum Annual Tax then the Current Tax and the Current Subject Wages are final and the calculation is complete.
        • If the Total YTD Tax is greater than the Maximum Annual Tax, then the cap has been exceeded and the cap must be applied. Also, the Current Tax and Current Subject Wages must be recalculated subject to the cap.
    4. Apply the Annual Tax Cap and Recalculate Tax:
      • First, calculate the Final Current Tax: Subtract YTD Accrued Tax from the Maximum Annual Tax.
      • Finally, calculate the Final Current Subject Wages: Multiply the Final Current Tax by the Percent (Payroll>System Setup>Taxes>Other Taxes>Employee Taxes section).

     

    Factors in these calculations include:

    Tax Code setup Payroll>System Setup>Taxes>Other Taxes.

    Setup on the Payroll>System Setup>Employee Information>Employee Profile>Taxes>Taxes page and the Job and Pay Rate section.

    Note: Earnings, Benefits and deduction amounts that are subject to Other Tax Codes must be selected on the Payroll>System Setup>Taxes Earning, Benefits, or Deduction Codes forms.

    Note: Any Earning Code flagged as “Contribute to Net Pay Only” will not be considered in the calculation of any Other Tax Code Calculation.