Defining tax deduction codes

Access Deduction (PR05.1).

Define deduction code and description. Specify this information:

Deduction: The code that represents the deduction.

Note: The alphanumeric name of the deduction code plays a role in the order in which deductions are applied to employee pay.
Description: The description of the deduction.
Payment Description: The description of this deduction that prints on payments.

Note: If you assign a deduction class to this deduction code, then the payment description on the deduction class overrides this payment description.

Select Tax in the Calculation Type field.

Define pay information. Specify this information:

Pay Class

Select a pay class if you want the system to calculate the deduction on pay associated with a specific pay class.

Amount or Percent

Specify an amount or percent. The type that you select in the Calculation Type field determines if the system considers the value that you specify an amount or percent.

Currency

Determines the currency you want Payroll to use to calculate the deduction.

If the company uses one currency, then the company currency is set as default in this field.

If the company uses multiple currencies, the process level currency is set as default in this field.

Note: The employee currency and deduction currency must match for you to be able to assign the deduction to the employee.

Addl or Minimum Amt,Pct

Specify the additional amount or percent to be considered when the Calculation Type is Flat Amount Plus Percent of Gross Pay or Percent of Disposable W/ Min Flat Amount.

Exclude Amount

Specify the pay period amount that is excluded from the garnishment calculation. The amount is valid for Calculation Type = 7.

Select if this is a Company or Employee-paid tax deduction in the Adjust Pay field.

To include this deduction in a deduction class, select the deduction class in the Deduction Class field.

Define the deduction processing options. Specify this information:

Priority

The number that represents the order in which Payroll takes the deduction within the category of Tax Deductions.

Arrears

Select what you want Payroll to do if there is not enough employee pay to cover the deduction.

Cycles

Select the deduction cycles in which Payroll takes the deduction.

Select X to indicate in which cycle the deduction is valid.

Select T for any deduction cycle in which taxable wages are updated but taxes are not taken.

Note: You can override the value in these Cycles fields for individual employees when you assign the deduction to employees.

See Employee: taxes.

Arrears Process Rule

Select the number of one-time deductions to be processed during deduction processing.

Process Rule

If you use deduction cycles to control when employee deductions are processed, you can verify whether the deduction has already been processed for the payment period.

Garnishment

Select whether the deduction is for garnishment.

Exc from Garnishment

Select whether to exclude the deduction from the calculation of disposable income for garnishment purposes. Disposable income equals gross pay minus taxes and other deductions.

Matched Deduction

Select the deduction on which the calculation is based, if you are defining a deduction with a calculation type Percent of Employee Deduction.

Linked Deduction

Select the linked deduction to be used for after tax deductions when the federal limit is reached for the pretax deduction.

If this is a Canada tax deduction and you want Payroll to automatically assign this deduction to certain employees, then select the deduction required code in the Required Code field.

Note: When you calculate earnings and deductions, Payroll verifies the effective date to ensure that the deduction needs to be taken.

Specify the beginning date or the date range that the deduction is in effect in the Effective Date fields. This date or date range can be overridden on the employee deduction.

Specify or select the accrual account for the deduction in the Accrual Account field. If you do not select a distribution company, the system uses the deduction accrual distribution company - first from the process level - then, from the company and from the employee record.

To override the accounts defined at the HR Company level, select accounts for the deduction in the Expense Account field. If you do not select an expense account, the system allocates company-paid deduction expenses to the appropriate distribution company, accounting unit, account, and sub-account number defined on pay codes that you specify for the employee.

If HR00 Override Deduction Expense field is set to (3) Yes; Override Specified Ded, then use this field to identify which Company Paid Deductions should have the expense defaulting overridden. Select (2) Yes to restrict the posting of the selected deductions to identified Pay Code amounts.

Define deduction limits. Specify this information:

Monthly Limit: The maximum amount Payroll can deduct for this deduction in one month.

Note: You can override this amount for individual employee deductions.
Payment Limit: The maximum amount Payroll can deduct for this deduction in one payment.

Note: You can override this amount for individual employee deductions.

If you use the Project Accounting application, then you must define the activity options. Specify this information:

Activity: The activity to which Payroll associates any deduction expenses.
Account Category: The activity category to which Payroll associates any deduction expenses.
WC Rate Table: Select whether the deduction is based on a workers' compensation premium table.
Print on Payment: Select whether company-paid deductions print on the employee's payment. This is useful for flex amounts.
Used in Benefit: Identifies if the deduction has been used in Benefits (BN15). This field is also set to 'Y' if HR00 GHR Benefits flag = 'Yes'.
Risk Classification Cd: Specify the value that corresponds to the Risk Classification Code indicated on the BSI Optional Rate Override.

On the Tax tab, define the tax information. Specify this information:

Country Code: The country code that you want to use to calculate the deduction.
Tax Status: Leave this field blank to indicate a Taxable deduction. If you select an x in this field, Taxable Wages Table can be used for Exempt Table deductions to reduce taxable wages.
Tax Category: Select the tax category for this tax deduction code.

Note: The tax categories available for you to select are based on your selections in the Adjust Pay and the Country Code fields.
Tax Authority: Select the governing tax authority for the tax deduction.
Self Adjust Tax: Determines whether Payroll verifies the year-to-date taxable wages multiplied by the rate to determine the year-to-date ceiling tax and makes necessary adjustments. This default setting is Yes.

Note: If the rate changes in mid-year and this field is set to Yes, or if you change this field from No to Yes in mid- year, Payroll makes adjustments to the whole year-to-date, which results to large adjustment amounts.
Tax Formula: Determines which custom tax formula the application uses in calculating this deduction.

Note: Your organization must define custom data for a tax in the appropriate tax engine tax tables before you can use this field.
Tax Recip Formula: Specify the Reciprocal Formula to be used for employees living in Missouri, but working outside the state.
Addl Tax Code: Specify a value to take the lump sum annual liability for Pennsylvania LST deductions on a single payment, rather than prorating the tax liability over the course of a year.
Prior SUI Wages (Prior State Unemployment Income Tax Wages): If this is a State Unemployment deduction code, then this field indicates if Payroll uses prior states' unemployment taxable wages to calculate the taxable wages for the employee's current unemployment state.
MTD, QTD, YTD Wages: Select whether the deduction is based on month-to-date wages.

Note: The payment date that you specify on Earnings and Deductions Calculation (PR140) determines the pay records that are included in the month-to-date calculation.
CIP Percent: Specify the applicable percent of the amount withheld for the acquisition of shares for employees participating in the co-operative investment plan. This value will be passed to the tax engine for Q1 tax status deductions.
Claim Code Defaulting: Specify a value to default a Claim Code value to PR13.5/PR13.6 on the Income Deduction(s) at Source.

Click EHT Wages, if the deduction is an EHT deduction, to define or view wages.

Note: You can specify historical information by hand, if needed. When you run Employee Wages for Employment Health Tax (PR125), the Payroll application updates this form.

Click Add'l Tax Info to access Estimated Gross Wage (PR57.1). Use PR57.1 to specify prior quarterly gross wages for company-paid Payroll Expense Taxes. The estimated gross wages are passed to BSI to determine the taxation for Payroll Expense Taxes.

If you use the Accounts Payable application, then use the Accounts Payable tab to define AP options. Specify this information:

Update Accounts Payable

Select whether to create invoices for payroll-related payables when you close Payroll.

Create Invoice by Employee

Select whether to create AP invoices by employee.

See the Accounts Payable User Guide.

Vendor

The vendor that you want to use to create Accounts Payable invoices for this deduction.

Note: Click Additional Vendors to define vendors and process level combinations for this deduction.

Remit To

Remit To identifies a vendor location where payments are to be remitted. This field populates the Remit-To-Code on AP invoice records Basic Invoice (AP20.1)via the AP interface.

If you use this field, the payment address comes from Vendor Location (AP10.2). If this field is left blank, then the payment address defaults from Vendor (AP10.1).

Remit To can be defined for:

An individual garnishment on US Employee Garnishment (PR26.1)or Canada Employee Garnishment (PR47.1).
An individual process level override within deduction on Additional Vendors (PR05.3).
An entire deduction on Deduction (PR05.1).

If you use this field, then you must also select a vendor in the Vendor field.

Defining tax deduction codes

Related reports and inquiries