Understanding Payroll Tax Setup
This chapter provides an overview of payroll tax setup, lists prerequisites, and discusses how to set up:
Unemployment insurance information
Workers' Compensation information
Understanding Payroll Tax Setup
Before you can process payroll for employees, you must set up tax information so that employees' taxes are calculated properly. Tax amounts and some federal and state insurance amounts are calculated by a third-party software package called Quantum for Payroll Tax. Quantum for Payroll Tax is a product, made by Vertex, Inc., that integrates with the JD Edwards EnterpriseOne Payroll system. You can also use the GeoCoder, another product made by Vertex, Inc.; this program can automatically assign tax information to employees and business units.
The JD Edwards EnterpriseOne Payroll system passes information such as the tax authority, taxable wages, exemptions, and supplemental wages to Quantum for Payroll Tax, which then calculates each employee's tax. For unemployment insurance, you must set up tables that Quantum for Payroll Tax uses to calculate the appropriate taxes.
Prerequisites
Before you complete the tasks in this section:
Define information about each company within the organization.
Define a valid tax type code for each tax authority number (tax area) that you use.
Define the names of the workers-compensation insurance-basis tables in user-defined code (UDC) 06/IP.
Define the valid values for workers compensation codes in UDC 00/W.
Setting Up Unemployment Insurance Information
This section provides an overview of unemployment insurance, and discusses how to set up unemployment insurance rates.
Understanding Unemployment Insurance
Setting up unemployment insurance rates enables you to define state unemployment insurance and state disability insurance premiums that a company pays to the Federal government. You enter this information using the Unemployment Insurance Rate Revisions program (P079221). These records are stored in the F069226 table. When you set up and use these rates, they override the employee-paid tax rates provided by Quantum for Payroll Tax.
You must set up tax type C for any state whose unemployment insurance rate differs from the federal rate. If you do not set up state-specific information, the system uses the default federal rate it retrieves from Quantum.
You must also set up tax types GM, G1, G2, HM, H1, and H2 to calculate employee- and employer-paid state miscellaneous taxes. Contact local or federal taxing authorities for more information about tax requirements and reporting.
The system calculates unemployment insurance amounts for each state in which an employee works during a payroll cycle. The calculations differ depending upon whether state-specific information exists for tax type C.
No State-Specific Records for Tax Type C Exist
If the system does not find any state-specific records, the system retrieves federal unemployment tax rates and limits from Quantum, and prorates the amounts across each state in which the employee worked during the payroll cycle.
State-Specific Records for Tax Type C Exist
If the system does find state-specific records, the system prorates gross, excludable, and excess wages across each state in which the employee works during the pay cycle. The system then calculates the state-specific tax amount by multiplying the appropriate amount of wages by the state-specific rate. If no state-specific record exists for one or more states, the system calculates the tax amount for that state using the Federal rate. The system then totals all of the state tax amounts and updates the Federal tax amount with this total.
Note. The Unemployment Insurance Rate Revisions program (P079221) is the only method you can use to override state unemployment
insurance rates. The system ignores state-specific tax type C overrides made at the employee-level or on interim payment tax
overrides.
Additionally, the system does not self adjust state unemployment amounts, nor does it retroactively recalculate amounts that
were calculated prior to entering the state-specific rates. If you calculated previous tax amounts incorrectly, you must manually
correct those amounts using adjustment interim payments.
See Also
Entering Tax Overrides for an Interim Payment
(USA) Entering Tax Withholding and Override Information for U.S. Employees
Forms Used to Set Up Unemployment Insurance Information
Setting Up Unemployment Insurance Rates
Access the Unemployment Insurance Rate Revisions form.
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Tax Type |
Enter the code that indicates the type of payroll tax being processed. This is a UDC (07/TX). To set up state minimum wage amounts, you must enter MW in this field. To do so, you must first add MW to UDC 07/TX. However, you should not change the codes and definitions that are provided with the software. To enter state-specific unemployment insurance information, enter C in this field. |
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Tax Authority |
Enter a code that identifies a geographical location and the tax authorities for an employee work site, including employee and employer statutory requirements. This code is synonymous with the GeoCode. To determine the valid codes for your location, refer to the documentation for the tax calculation software that you are using. For example, enter 33 to specify New York. |
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Effective Dates Of Rates- From: |
Enter the first date in a range of effective dates. Note. For state-specific unemployment insurance, if you enter a past date, the system begins using the associated rate during the next payroll cycle. The system does not self-adjust or retroactively calculate tax amounts that have already calculated. |
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Rate |
Enter the rate that the system uses to compute U.S. unemployment and Canadian employer-paid employment insurance premiums. This rate is represented as a decimal fraction. |
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Exc. Prm. (exclude premium) |
Enter the code that indicates whether the premium portion of overtime pay should be excluded from the calculation. For workers compensation rates, this field relates to only those pay types that are defined in the Workers-Compensation Insurance-Basis Table. For U.S. unemployment-insurance rates, this field relates to all pay types that are defined as taxable. For Canadian employment-insurance rates, this field should be set to No because premium pay such as overtime is not excluded from employment insurance in Canada. For pay tables that are used for step progression processing, this field should be set to No. |
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Annual Earn Limit |
Enter the annual limit for U.S. unemployment insurance premiums or Canadian EI insurable earnings. |
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Minimum Hours |
Enter the minimum number of hours that must be worked during the pay period before the tax authority considers a week has been worked. |
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Minimum Amount |
Enter the minimum amount of dollars that must be earned (paid) during the pay period before the tax authority considers a week has been worked. |
Setting Up Workers' Compensation Insurance Information
This section includes an overview of Workers' Compensation, and discusses how to set up:
Workers' Compensation insurance-basis tables
Workers' Compensation insurance rates
Understanding Workers' Compensation
To accurately calculate Workers' Compensation amounts for employees during the payroll cycle, you must set up Workers' Compensation Insurance-Basis tables and rates.
Workers Compensation Insurance-Basis Tables
You set up tables for workers compensation insurance to maintain groups of pay types or benefits for which insurance premiums for workers compensation and general liability insurance are calculated. You can choose to exclude the premium portion of overtime pay from the calculation.
Typically, each workers compensation insurance-basis table represents a state or province and includes the types of earnings that are insurable in that state or province for workers compensation. The state or province typically supplies the information that you need to set up the tables.
You can also use these tables to identify the pay types to be included in year-end processing, automatic timecard generation, and Canadian ROE processing.
Setting Up Workers Compensation Insurance Rates
You set up workers-compensation insurance rates to calculate workers compensation and general liability insurance premiums. You define these rates by the state or province, company number, and a range of dates.
Typically, the state, province, or insurance carrier supplies you with the information that you need to set up the insurance rates.
Note. For some taxing authorities, you might need to set up workers compensation as an exempt deduction. In this case:
Enter W on the Tax Exemptions form when you set up the DBA.
Enter the DBA code on the Workers Compensation Insurance Basis Tables form.
The system calculates workers compensation in the payroll journal entries step of the payroll cycle. It calculates workers compensation for each timecard and updates each timecard with the workers compensation amount in the Employee Transaction Detail File table (F06116). This calculation is performed by JD Edwards EnterpriseOne software. All other tax calculations are performed by Quantum for Payroll Tax.
See Setting Up Deductions, Benefits, and Accruals.
Forms Used to Set Up Workers' Compensation Information
Setting Up Workers' Compensation Insurance-Basis Tables
Access the Workers Compensation Insurance Basis Table Revisions form.
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Insured Pay Table No. (insured pay table number) |
Enter the code that identifies a table of pay, deduction, and benefit types that define the basis for various payroll calculations. These tables are used in several processes, such as defining insured pay types for workers compensation and identifying pay types to be included in automatic timecard generation. Step progression processing uses valid pay types from the Workers Compensation Table. You can add a code to the UDC list (07/IP), and then use that code to define a range of pay types in the Workers Compensation Table (for example, STP for Step Progression). The Step Progression table uses the range of defined pay types to determine when an employee has met the step progression requirements and automatically moves to the next step. You must set up a step progression pay table if you are using the Hourly method for step progression processing. If you are using the Pieces method, you might want to set up pay types for individual pieces, and then enter the pieces pay types in the pay table. It is not necessary to set up a pay table if you are using the Days method. |
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Exclude Premiums |
Enter the code that indicates whether the premium portion of overtime pay should be excluded from the calculation. For workers compensation rates, this field relates to only those pay types that are defined in the Workers-Compensation Insurance-Basis Table. For U.S. unemployment-insurance rates, this field relates to all pay types that are defined as taxable. For Canadian employment-insurance rates, this field should be set to No because premium pay such as overtime is not excluded from employment insurance in Canada. For pay tables that are used for step progression processing, this field should be set to No. |
Setting Up Workers' Compensation Insurance Rates
Access the Workers Compensation Insurance Revisions form.
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Tax Authority |
Enter the code that identifies a geographical location and the tax authorities for an employee work site, including employee and employer statutory requirements. In the Vertex payroll tax calculation software, the tax area code is synonymous with GeoCode. To determine the valid codes for the location, refer to the documentation for the tax calculation software that you are using. |
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Trans. Class Code (transaction class code) |
Enter the code that identifies whether the workers compensation premiums were employee or company paid. Values are: E: Employee Paid. C: Company Paid. |
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WCI Code (workers' compensation insurance code) |
Enter the UDC (00/W) that represents a workers' compensation insurance (WCI) code. This code should correspond to the classifications on the periodic workers' compensation insurance reports. |
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% H (percentage of hours) |
Enter the code that indicates whether workers' compensation insurance is based on a percentage of employees' pay or on the number of hours that the employees work. Values are: %:Percent of gross. 1:Annual Limit/Percent of Gross. 2:Annual Limit/Hours. 3:Monthly Limit/Percent of Gross. 4:Monthly Limit/Hours. 5:Canadian Modified Pro-rating (45 Weeks). 6:Annual Limit/Percent of Gross (Includes all codes for an employee.) 7:Quarterly Limit/Hours 8:Weekly Limit/Percent of Gross H:Percent of Hours Worked Note. Methods 2,4, and 7 are for states that calculate WC/GL using hours instead of gross pay. For Washington state, the system will apply limits only for salaried employees. The system will use actual hours worked for hourly and piece work employees. |
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Workers Comp Expr. Rt (workers compensation experience rate) |
Enter the multiplier assigned by the insurance carrier which is used to modify the standard premium rate for workers compensation insurance from the table. This rate is based upon the insurance company's experience with the particular job type and the hazards associated with it. For example, if the insurance company trends indicate that construction workers in New Jersey have more work-related accidents than workers in New York, the company will rate the work done in New Jersey more hazardous. |
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Workers Comp Rate (workers compensation rate) |
Enter the rate as provided by the Workers Compensation Insurance company. It is multiplied by the Experience Rating prior to the calculation of premium. The Rate is represented as a decimal fraction. |
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Worker Comp Earn Limit (workers compensation earning limit) |
Enter the limit for Workers Compensation. Depending on the benefit method chosen, this limit could be annual or monthly. Workers Compensation is not calculated on amounts that exceed this limit. If a limit does not exist, leave this field blank and the system uses the default value 9,999,999.00. |
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Gen Liability Rate (general liability limit) |
Enter the rate used to calculate the insurance premiums for General Liability. The Rate is represented as a decimal fraction. |
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Gen Liability Earn Limit (general liability earning limit) |
Enter the limit for General Liability. Depending on the benefit method chosen, this limit could be annual or monthly. General Liability is not calculated on amounts that exceed this limit. If a limit does not exist, leave this field blank and the system uses the default value 9,999,999.00. |
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Pay Tbl. (pay table) |
Enter the code that identifies a table of pay, deduction, and benefit types that define the basis for various payroll calculations. These tables are used in several processes, such as defining insured pay types for workers compensation and identifying pay types to be included in automatic timecard generation. Step progression processing uses valid pay types from the Workers Compensation Table. You can add a code to the UDC list (07/IP), and then use that code to define a range of pay types in the Workers Compensation Table (for example, STP for Step Progression). The Step Progression table uses the range of defined pay types to determine when an employee has met the step progression requirements and automatically moves to the next step. You must set up a step progression pay table if you are using the Hourly method for step progression processing. If you are using the Pieces method, you might want to set up pay types for individual pieces, and then enter the pieces pay types in the pay table. It is not necessary to set up a pay table if you are using the Days method. |
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Job (Opt) (job (optional)) |
Enter the alphanumeric code that identifies a separate entity within a business for which you want to track costs. For example, a business unit might be a warehouse location, job, project, work center, branch, or plant. You can assign a business unit to a document, entity, or person for purposes of responsibility reporting. For example, the system provides reports of open accounts payable and accounts receivable by business unit to track equipment by responsible department. Business unit security might prevent you from viewing information about business units for which you have no authority. |
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WCI SubClass (workers compensation insurance code) |
Enter the code that identifies any special circumstances associated with the workers compensation insurance (WCI) code, resulting in multiple rates for the same WCI code due to location or risk, for example. The subclass should remain blank if multiple rates do not exist. Values are: Blank: There are no special circumstances. F: There are special circumstances. |