Pretax Deductions

Pretax deductions are deductions made from the gross income, thus reducing the total taxable income of the employee and also reducing the tax withheld.

The secondary classification determines how the deduction is calculated. The secondary classifications defined for pretax deductions for Canada are:

• Registered Pension Plan (RPP) or or Registered Retirement Savings Plan (RRSP)

• Union Dues

For the secondary classification of RPP, you must capture the seven-digit RPP or Deferred Profit Sharing Plan (DPSP) registration number that appears on the year end forms.

Wage basis rules determine how pretax deductions reduce gross wages. A reduction in gross wages results in a reduction in the amount of taxable income, thereby allowing a reduction of some taxes and involuntary deductions.

The application captures the balance of the pretax deduction for the pay period, as well as the year-to-date balance for the employee contribution.

When there are insufficient earnings to pay a pretax deduction and to pay all taxes, the pretax deduction must be reduced. When creating a Pretax Deductions element, you specify whether the payroll run takes nothing or a partial amount in case it can't take the full deduction. You also choose whether or not to hold the arrears in a balance so that the payroll run can try to deduct this amount in a subsequent payroll period. The arrears are held at the Payroll Relationship level.