When a taxpayer pays more than they owe, you must decide what to do with the excess money. The following points describe two possibilities:
You could create a new obligation to hold the excess (let's call it an overpayment obligation). The credit would need to be transferred from this obligation to the tax obligations at an appropriate time.
You could direct the excess payment on one of the existing tax obligations.
You control which method is used by plugging in the appropriate Overpayment Distribution algorithm on each account type (i.e., you can choose a different method for different account types). If you choose to hold overpayments on a separate obligation, then you must set up an obligation type.
The following points highlight interesting information about overpayment obligation types:
It should have an accounts payable distribution code. This is because when a payment segment is created for this type of obligations, the system must credit a liability (an overpayment is a liability).
It's important to indicate that the overpayment obligation is a one-time obligation. Why? Because this means that the system will automatically close the obligation when it's balance falls to zero (i.e., when appropriate business processes transfer all of the overpayment to tax obligations).
A bill segment type is not needed because the system never creates bill segments for such obligations (they exist only to hold excess credits).
P&I controls and the P&I related algorithms are not needed.
You may also want to turn on the alert message
You must reference this overpayment obligation type as the parameter value on your overpayment algorithm (this algorithm is plugged in on the desired account types). Refer to Overpayment Algorithm for more information about this algorithm.
You must design appropriate business procedures to use this overpayment when additional debt is incurred on tax obligations.
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