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 Reimburse- ment |
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 |