Understanding Taxable Fringe Benefit Setup for the U.S.

You set up a taxable fringe benefit DBA when you want Quantum for Payroll Tax to calculate appropriate taxes for a benefit such as Group Term Life Insurance. For example, the taxable fringe benefit function in your JD Edwards EnterpriseOne software provides Group Term Life Insurance amounts to Quantum for Payroll Tax, and then retrieves the taxable or subject amounts for each tax. Subject amounts are wages that are included in the subject gross but are not included in the adjusted current gross.

You can use the PDBA Setup program (P059116) to create a new DBA for a taxable fringe benefit. After you create the DBA, you select the Group Term Life (GTL) option on the U.S. Legislative/Regulatory form. For the U.S. and Canada, GTL represents the fringe benefit for Group Term Life. In this example, gross pay equals 1000 and the fringe benefit for Group Term Life equals 20:

Tax	The Rule	Taxable Gross	Subject Gross	Adjusted Current Gross
Federal Withholding	Withholding not required but must be reported	1000	1020	1020
Social Security/Medicare	Must be withheld	1020	1020	1020
FUTA	Exempt	1000	1000	1000

Subject amounts are wages that are included in the subject gross but not in the adjusted current gross. Taxable amounts are wages that are included in the subject gross and in the adjusted current gross. Exempt amounts are wages that are not included in the subject gross or the adjusted current gross.

The Quantum for Payroll Tax system calculates tax only on amounts that are taxable. Only taxable amounts are included in adjusted current gross.

Federal Withholding and FUTA display the gross pay. To account for the fringe benefit for Group Term Life, the Quantum for Payroll Tax system adjusts gross pay to 1020 for Social Security and Medicare. A taxable gross of 1020 is stored in the JD Edwards EnterpriseOne system.

Note: Depending on your organizational requirements, when you use the GTL function, you might need to add the GTL benefit amounts back for year-end processing. For State, Local, SCI, and County taxes, you need to determine whether Vertex classifies GTL as Subject. You can then set up the DBA to track by tax area and refer to the year-end special handling instructions to add back to wages for W-2 reporting.