Overview of Begin-of-Year Processing for the US

There are several begin-of-year activities you must perform before you run the first payrolls of the new year.

Some of these preparations involve updates to the employees' tax card, and you can perform them on the individual cards.

Note: You can perform your year-begin processing before you have completed your year-end processing of the previous year.

What you want to do	How you do it
Clear last year's deferred compensation deductions limit overrides	For employees who required limit overrides during the previous year, you must remove these overrides before your first payroll run of the year.
Clear or update last year's federal or state tax exemptions and allowances	Employees use the Tax Withholding task from their Me page to enter their W-4 exemptions and allowances. As federal and some state tax exemption statuses expire after a year, the employee must submit new withholding forms by the deadlines identified by the IRS and states tax agencies to renew them. If they allow an exemption to expire, you must end date it as of the expiration date. Use the Start-of-Year Process to identify and end date these exemptions. Or you can update the individual cards manually. Refer to your state tax authority for info on what exemptions expire.
Verify Indiana county of residence or employment	For employees working or living in Indiana, you must ensure their Tax Withholding cards record their resident and work counties as of January 1. Use the Start-of-Year Process to complete this verification before the first payroll run of the year.
Validate legislative limits	Use the Calculation Value Definitions task to view these predefined legislative limits. 401 (k) Limit 403 (b) and 457 (b) Limits Social Security Limit State FUTA Credit Reduction Limit State Unemployment Wage Limit This data is predefined by Oracle and Vertex. You don't need to modify it.
Apply annual occupational or Local Service tax exemptions	Employees working in states with annual occupational or Local Services Taxes (LSTs) may seek exemption, such as the Pennsylvania LST. Use the Calculation Cards task to grant or revoke these exemptions.
Enable New York Paid Family Leave for eligible employees	The payroll process doesn't automatically withhold deductions for the New York Paid Family Leave program. You must impose this tax on eligible employees.
Update your payroll definitions	Use the Payroll Definitions task to verify the payroll calendar dates for the coming calendar year.
Update your state unemployment insurance rates	The unemployment insurance divisions of the states where you employ workers may change their state unemployment insurance (SUI) rates for the new year. You must make these changes on your organization calculation card as soon as you have received the new rates.
Update your state unemployment insurance wage limit	These states have multiple SUI wage limits. Michigan Nebraska Rhode Island If one of a state's wage limits changes for the new year, you must make the appropriate changes on your organization calculation card.
Opt-out individual employees from contributing to pretax age catch-up contribution	To opt-out an employee, do the following prior to processing the first payroll of the calendar year. Start the Calculation Cards task. Search for and select the person. Open their Reporting Information card for editing. Add the Reporting Information calculation component under the Federal component group. Set Eligible for Pretax Age Catch-Up Contributions to No under the calculation component details. Click Save and Close. You can do this for multiple employees through HCM Data Loader. For further info, see Payroll Configuration for SECURE 2.0 Act (ID 2971058.1) on My Oracle Support.

For further info, see the following sections.

Clear last year's deferred compensation deductions limit overrides

For employees who required a deferred compensation deductions limit override during the previous year, you must remove the overrides before your first payroll run of the year.

Deduction types	Where you set the override
401 (k)	For employees with 401 (k) plans, you may have set the override values for these employees in a couple places. For all employees enrolled in 401 (k) and 401 (k) catch-up, reset these input values on the Deferred Compensation 401k and Deferred Compensation 401k Catch-Up elements For specific employees, reset them on the element entries For further info, see Set Up 401 (k) and Roth 401 (k) Deferred Compensation Plans in the Help Center.
403 (b) and 457 (b)	For employees requiring the same override for their 403 (b) and 457 (b) plans, you would have set it on their Benefits and Pensions calculation card. 403 (b) Override IRS Annual Compensation Limit Override IRS Annual Limit Catch-Up Override IRS Employer Annual Compensation Limit Override IRS Employer Catch-Up Annual Compensation Limit Override IRS Limit 457 (b) Override IRS Annual Limit Catch-Up Override IRS Limit For further info, see Considerations When Setting Up 403 (b) and 457 (b) Deferred Compensation Plans in the Help Center.
457 (b) Special Catchup	The Start-of-Year Process flow end-dates the Accumulated Under-Utilized Contributions for Special 457 (b) Catch-Up value definition for the previous year. You must define a new value definition for the current year. This is part of the 457 (b) limit update. For further info, see Special 457 (b) Catch-Up Contributions on the Help Center.

Use the Start-of-Year Process flow to identify the employees with an override amount for their 401 (k), 403 (b), and 457 (b) plans. If the employee has one of these overrides, this flow end-dates it.

• Accumulated Under-Utilized Contributions for 457 (b) Catch-Up

• Override IRS Annual Compensation Limit

• Override IRS Annual Limit Catch-Up

• Override IRS Employer Annual Compensation Limit

• Override IRS Employer Catch-Up Annual Compensation Limit

• Override IRS Limit

For further info, see Start-of-Year Process in the Help Center.

Clear or update last year's tax exemptions

Employees use the Tax Withholding task from their Me page to specify their W-4 exemptions and other federal fields that affect the calculation of taxes. Because the exemption statuses for federal and some state taxes expire after a year, the employee must submit new Form W-4s by the IRS deadline to renew them.

Consider issuing reminders to your employees to renew these exemptions.

Use the Start-of-Year Process flow in Draft mode to generate a report that identifies the employees with Exempt status. Use this flow as verification prior running in final mode. When you run it in Final mode, it removes the exemptions and date stamps them with the effective date you select in the parameters.

For further info, see Start-of-Year Process in the Help Center.

For those employees who want to renew their exemptions, you must apply them based on each person's W-4.

1. From My Client Groups, click Payroll.

2. Click Calculation Cards.

3. Search for the person, and open their Tax Withholding card for editing.

4. Specify the proper effective date.

5. In Withholding Details, select Federal.

6. Click Edit, and select Update.

7. In Withholding Exemption, specify the appropriate exemptions.

8. Save and submit your changes.

Verify Indiana county of residence or employment

For employees working or living in Indiana, you must ensure their Tax Withholding cards record their resident and work counties as of January 1. These cards must reflect any changes to their addresses before you run the first payrolls of the calendar year.

Note: Because the period between year-end and the deadline is so brief, you have limited time to update this data. Consider performing them early with a future effective date.

Use the Start-of-Year Process flow to:

1. Compare the employees' resident and work counties against the values in their tax cards.

2. Update the tax cards appropriately.

For further info, see Start-of-Year Process in the Help Center.

Apply annual occupational or local service tax exemptions

Employees working in states with annual occupational or LSTs may seek exemption, such as the Pennsylvania LST. If granted, they must provide you with their paperwork at the beginning of the calendar year.

Before processing the first payrolls of the year, you must capture these exemptions for your employees. For employees who have let their exemptions lapse, you must likewise update the tax card accordingly.

To specify these exemptions for multiple employees, use the HCM Data Loader.

Here's how you can specify these exemptions for individual employees.

1. From My Client Groups, click Payroll.

2. Click Calculation Cards.

3. Search for the person, and open their Tax Withholding card for editing.

4. Enter an effective as-of date.

5. Expand the Regional section, and review the following.

   • Exempt from LST

   • Exempt from City Tax

   • Exempt from School District Tax

6. If you need to make changes, click Edit.

7. Make the required changes.

   Select Yes to apply the exemption.

   Select No to revoke the exemption.

8. Save and submit your changes.

Enable New York family leave insurance for eligible employees

The payroll process doesn't automatically withhold deductions for the New York Paid Family Leave program. To impose this tax on eligible employees, enable it at one of these levels.

• Payroll statutory unit (PSU)

• Tax reporting unit (TRU)

  Settings at the TRU level override those at the PSU level. Settings on the tax card override both.

For further info, see New York Family Leave Insurance in the Help Center.

Update your state unemployment insurance rates

The unemployment insurance divisions of the states where you employ workers may change their SUI rates for the new year. You must make these changes on your organization calculation cards as soon as you have received them.

Here's how you do it.

1. Search for and start the appropriate task from your implementation project.

   • Legal Entity Calculation Cards

   • Legal Reporting Unit Calculation Cards

2. Open the Calculation Rules for Tax Reporting and Payroll Statutory Unit card for editing.

   Create it if it doesn't already exist.

3. Set the effective as-of date for the new rate.

4. Select the appropriate state node under the Regional component group.

   Create it if it doesn't already exist.

5. Select the State Unemployment calculation component.

6. Select Enterable Calculation Values on Calculation Cards in State Unemployment: Details.

7. Select SUI Employer Rate, and click Edit>Update.

   Add it if it doesn't already exist.

8. Enter the new rate, and click OK.

9. Click Save and Close.

Update your state unemployment insurance wage limit

The states where you employ workers may change their SUI wage limits for the new year. If you have made changes to state wage limits the previous year, review those changes on your organization calculation cards and update as appropriate.

For states with multiple wage limits, the tax calculations automatically use the lower limit. If you need the other limit, make the change on your organization calculation cards.

Here's how you do it.

1. Search for and start the appropriate task from your implementation project.

   • For the PSU card, use Legal Entity Calculation Cards.

   • For the TRU card, use Legal Reporting Unit Calculation Cards.

2. Open the card for editing.

   Create it if it doesn't already exist.

3. Set the effective as-of date for the new wage limit as January 1.

4. Select the appropriate state node under Regional.

   Create it if it doesn't already exist.

5. Select State Unemployment.

6. In State Unemployment: Details, select Enterable Calculation Values on Calculation Cards.

7. Select SUI Wage Limit for Employer.

   Add it if it doesn't already exist.

8. Click Edit, and select Update.

9. Enter the new limit, and click OK.

10. Click Save and Close.