Understanding Tax Specification

It is important to understand how taxes work when specifying special tax options and tax methods for earnings codes.

This topic discusses:

(USA) U.S. tax specification.
(CAN) Canadian tax specification.

To better understand how the U.S. tax options work, consider how you might define the following earnings codes:

Earnings Code	Federal Withholding Tax (FWT)	Federal Unemployment Tax (FUT)	Federal Insurance Contributions Act (FICA)
Regular	Tax	Tax	Tax
Overtime	Tax	Tax	Tax
Injury Pay	Tax	No Tax	Tax
Expense Reimbursement	No Tax	No Tax	No Tax
Disability Payment	Tax	No Tax	No Tax

Select the Subject to FWT (subject to federal withholding tax), Subject to FUT (subject to federal unemployment tax), and Subject to FICA (subject to Federal Insurance Contributions Act) check boxes (on the Earnings Table - Taxes page) for all earnings to add to the taxable gross for the specific tax. These settings enable the system to determine exactly how much of an employee's pay is subject to federal taxes.

To better understand how to tax different earnings codes, consider how you might define the following earnings at Viceroy Northern Bank:

Earnings Code	Canadian Income Taxes (CIT)	True T4	Canada Pension Plan (CPP)	Employment Insurance (EI) Earn	EI Hrs
Regular	Tax	Yes	Tax	Tax	Yes
Overtime	Tax	Yes	Tax	Tax	Yes
Shift Premium	Tax	Yes	Tax	Tax	No
Expense Reimbursement	No Tax	No	No Tax	No Tax	No
Retiring Allowance	Tax	No	No Tax	No Tax	No

Earnings Code	Quebec Income Taxes (QIT)	True RL	Quebec Pension Plan (QPP)	Payroll Tax	T4A	RL-2	Quebec Parental Insurance Plan (QPIP)
Regular	Tax	Yes	Tax	Tax	No Tax	No Tax	Tax
Overtime	Tax	Yes	Tax	Tax	No Tax	No Tax	Tax
Shift Premium	Tax	Yes	Tax	Tax	No Tax	No Tax	Tax
Expense Reimbursement	No Tax	No	No Tax	No Tax	No Tax	No Tax	No Tax
Retiring Allowance	Tax	No	No Tax	Tax	Tax	Tax	No Tax

Select the tax option check boxes (on the Earnings Table - Taxes page) for earnings types to tax or accumulate. These settings enable the system to determine how much of an employee's pay is subject to different tax types:

Earnings Code	Amount	CIT	True T4	CPP	EI Earn	EI Hrs
Regular	1000	1000	1000	1000	1000	40
Overtime	200	200	200	200	200	10
Shift Premium	100	100	100	100	100
Injury Pay	200	200	200	200
Expense Reimbursement	1000
Retiring Allowance	500
Total	3000	1500	1500	1500	1300	50

Earnings Code	Amount	QIT	True RL	QPP	T4A	RL-2	Payroll Tax	QPIP
Regular	1000	1000	1000	1000			1000	1000
Overtime	200	200	200	200			200	200
Shift Premium	100	100	100	100			100	100
Injury Pay	200	200	200	200			200
Expense Reimbursement	1000
Retiring Allowance	500				500	500.00
Total		1500	1500	1500	500	500.00	150	1300

Understanding Tax Specification

(USA) U.S. Tax Specification

(CAN) Canadian Tax Specification