Configure Wage Basis Rules for Pretax Deductions

In this example, you want to define state-level wage basis rules so that:

• Supplemental earnings are taxable

• Pretax deductions reduce taxable wages

Taxing Supplemental Earnings

With these steps, you identify supplemental earnings as eligible for California state taxes.

1. Start the Component Group Rules task.

2. Search for your US legislative data group.

3. Expand Regional, then Related Deductions, and then State Tax.

4. Select Wage Basis Rules, and click Create.

5. Enter an effective start date.

6. Select CA as the state.

7. Select the Supplemental Earnings primary classification.

8. Select the secondary classification.

9. Identify this as subject to the wage basis rule.

10. Click Submit.

Reducing Taxable Wages

1. No action is required for the pretax deductions to reduce taxable wages. Deductions of this type automatically reduce when you process payroll.

2. To change an existing pretax deduction from reducing gross wages to not reducing gross wages, define a wage basis rule.