Self-Adjustment Methods for Tax Withholding

Use the self-adjustment methods to evaluate earnings and tax amounts to ensure they're correct with a given tax rate. When all subject earnings reach the annual maximum limit, the payroll process no longer calculates the tax.

The various US taxation bodies often announce changes to their tax rates after the changes have gone into effect. You are responsible to ensure your employees' tax withholding values are properly adjusted.

The organization calculation cards provide self-adjustment methods to help the payroll process evaluate the earnings and tax amounts to ensure they're correct with a given tax rate. When all subject earnings reach the annual maximum limit, the process no longer calculates the tax.

Update Your Calculation Cards

The organization calculation cards capture this info for you at the legislative level.

• Use the Legal Entity Calculation Cards task to set self-adjust methods for federal and regional taxes at the payroll statutory unit (PSU) level.

• Use the Legal Reporting Unit Calculation Cards task to set these methods at the tax reporting unit (TRU) level. Any settings you make on the TRU organization card override the settings on the PSU organization card.

You can set self-adjustment methods for the following taxes.

• Federal Unemployment Tax Act (FUTA)

• Social Security

• State unemployment insurance (SUI)

• State disability insurance (SDI)

• Medicare

There are several self-adjustment options available to you.

Adjustment method	What it does
Bypass collection	Payroll process doesn't calculate taxes for this organization. Use this if you as the employer are exempt from wage accumulation and taxes. Note: Wage accumulation would still occur for these taxes. FUTA Medicare Social Security SUI
No self-adjust	Payroll process doesn't perform any adjustments based on changes to tax rates. You are responsible for ensuring the correct withholding values for your employees.
Quarterly self-adjust	Payroll process performs adjustments for rate changes on a quarterly basis. Use this method in cases where a state changes its rate midyear. By checking each quarter individually to determine adjustments, it maintains the integrity of the calculations before the change. This is available for state taxes only.
Self-adjust	Payroll process performs adjustments for rate changes during the first available payroll run. It bases the withholding calculations on year-to-date earnings, rather than earnings within a pay period. This method provides the most accurate calculation.
Self-adjust at maximum	Payroll process takes no action until an employee reaches their yearly maximum wage limit. Then it performs any adjustments during the first available payroll run.