Payroll Deduction Codes

To access this form, go to Payroll>System Setup>Payroll Codes>Deduction Codes

Use this form to add a new Deduction Code or edit an existing one. The deduction codes entered are used throughout the system. The system uses deduction codes when it is calculating pay, creating an accounting entry for payroll, calculating and reporting W-2 information and other tax reports, and reporting.

The landing page when adding or editing a deduction code.

 

Click a dropdown link below to learn more about the fields in each section of the form.

Code

Enter a Deduction Code. You should make the first eight characters of the code unique so that the paycheck displays a useful identifier. We recommend limiting your entry to strictly alphabetic characters (A through Z) or numeric characters (0 through 9), and avoiding the use of symbols.
Status

Specify the status of the code. The status can be changed at any time. Below are valid status entries and their descriptions:

  • Active (A) - An active status allows transaction entry to this code.
  • Inactive (I) - Set a code to inactive when you do not want to use it regularly for transactions, but you may need to use it at some point. A warning message appears when you attempt to use an inactive code. The warning message is for notification only; you can still use the code in a transaction.
  • Discontinued (D) - Designate a code as discontinued when you no longer use it. The system does not allow transaction entry to be processed using a code with a discontinued status.
Title Enter the title of the deduction Code.

Liability Account

Enter the General Ledger liability account for this code. The account must be an existing General Ledger account that is not a subledger-type account. The account must have a status of Active or Inactive.

W-2 Information Box Number

Select W-2 Box Number 7, 8, 10, 11, 12, or 14 if this code falls into one of those W-2 categories.

  • Box 12 requires a corresponding box code, and cannot be used for anything other than the items specified by the box codes. You must enter one of the following Box Codes: A-H, J-N, P, R-T, V, W, Y, Z, AA, BB, CC, DD, EE, FF, GG, or HH.

  • Box 14 should be used for any other information you want to give your employee. You can enter up to five alphanumeric characters. The Box Code serves as a "label" for the optional amount displayed in box 14.

  • To have the benefits and taxes from this deduction Code appear in W-2 boxes 1-6, 16, 17, 18, and/or 19 (for Federal, State, and Other Taxes), select the check boxes in the "Taxes" section at the bottom of this form and leave the W-2 Box Number box in this section blank.

Choose a calculation method for this deduction code. The available methods are:

Fixed Percentage of Earnings: Select this method to determine deductions based on a percentage of earnings. The system first takes the total earning amount for just those earnings that are tied to the Deduction Code (as indicated on the "Earnings" tab). This earning amount is then multiplied by the percentage indicated in the "Percentage" box, to get a fixed percentage of earnings. Note that when using this calculation method, deductions vary with earnings.

Fixed Hourly Amount: Select this method to have the system base deductions on a fixed rate per hour worked. The system multiplies only the earning hours that are tied to the Deduction Code (as indicated on the "Earnings" tab), by the hourly amount specified in the "Amount" box. Note that when using this calculation method, deductions vary with hours worked.

Fixed Amount: Select this method when a deduction is based on a fixed amount per pay cycle. Enter a fixed deduction amount (in the "Amount" box) to calculate payroll.

Amount on Timesheet: Select this method to use the fixed amount, entered on the employee's timesheet, for deductions.

Percentage on Timesheet: Select this method to use a fixed percentage, entered on the employee's timesheet, for deductions.

Choose a calculation method, then fill out the following fields as required by the calculation method:

Percentage

Enter a percentage or amount, depending on the calculation method selected. You should enter a percentage for Fixed Percentage of Earnings, or an amount for Fixed Hourly Amount or Fixed Amount.

  • When entering percentages in the system, do not include a decimal point. For fractional percentages, you must enter the leading zeroes. For example, enter the following numbers to indicate the percentages:
    0005 = .5%
    005, 05, or 5 = 5%
    50 = 50%
Amount

Enter a percentage or amount, depending on the calculation method selected. You should enter a percentage for Fixed Percentage of Earnings, or an amount for Fixed Hourly Amount or Fixed Amount.
Maximum per Year

Enter the maximum amount allowed for deductions per calendar year. If there is no limit, enter a large number like 9,999,999,999 to be applied as the maximum. If the box is left at 0, 0 is applied as the maximum per year, and you will not get a benefit amount.

Maximum Percentage

Enter the maximum percentage allowed for a deduction, when "Percentage on Timesheet" is selected. When entering percentages include a decimal point. The percentage can range from zero to 100 percent. The system calculates up to four places to the right of the decimal point.

  • When entering percentages in the system, do not include a decimal point. For fractional percentages, you must enter the leading zeroes. For example, enter the following numbers to indicate the percentages:
    0005 = .5%
    005, 05, or 5 = 5%
    50 = 50%

Note: This section is only available if the Fixed Percentage of Earnings, Fixed Hourly Amount, or Percentage on Timesheet calculation methods were selected.

Select the Earning Codes to use when calculating this deduction.

Any Earning Code set up with "Contribute to Net Pay Only" (see Payroll Earning Codes) is not available to use when calculating this deduction.

Assign a payroll schedule to the code. This schedule helps the system determine whether or not to use a particular deduction code when creating a Regular/Supplemental timesheet for an employee.

Note: A schedule is required for all cycles and payroll types (regular and supplemental). If no changes are made to this tab, the system uses the default, "Always".

Monthly

Choose from "Always" or "Never" for Regular and Supplemental Payroll.
Semimonthly

  • Select "Always", 1st Payroll of the Month, 2nd Payroll of the Month, or "Never" for Regular Payroll.

  • Select "Always" or "Never" for Supplemental Payroll.
Biweekly

  • Select "Always", 1st Payroll of the Month, 2nd Payroll of the Month, 1st Two Payrolls in the Month, or "Never" for Regular Payroll.

  • Select "Always" or "Never" for Supplemental Payroll.

Weekly

  • Select "Always", 1st Four Payrolls of the Month, 1st Payroll of the Month, 2nd Payroll of the Month, 3rd Payroll of the Month, 4th Payroll of the Month, 1st and 3rd Payroll of the Month, 2nd and 4th Payroll of the Month, or "Never" for Regular Payroll.

  • Select "Always" or "Never" for Supplemental Payroll.

Use this section to determine which federal, state, and other taxes to apply for this Deduction Code. When a checkbox is selected, the employee's earnings are decreased by the amount of the deduction for the selected tax.

Federal Taxes

Select Federal Income (FIT), Social Security, Medicare, and/or Federal Unemployment (FUTA), as appropriate for this code.

State Taxes

Select State Withholding Tax (SWT) and/or State Unemployment Tax (SUTA), as appropriate for this code.

Other Taxes

Select Employee Paid (LWT) and/or Employer Paid (LER), as appropriate for this code.

Note: For example, suppose your earnings are $1000. You create a non-taxable deduction of $200. Select all the check boxes for federal taxes on this tab. The federal taxable earnings would be $800. Since the state and other taxes are not selected, the taxable earnings for state and other taxes would be $1000.

 

 

When you are finished making your changes, click .