How Payroll Statutory Units, Legal Employers, and Tax Reporting Units Work Together for the US

When you set up legal entities, you can identify them as legal employers and payroll statutory units (PSUs). Depending on how you structure your organization, you may have only one legal entity that serves as both PSU and legal employer, or you may have multiple legal entities, PSUs, and legal employers.

Legal Employers and Payroll Statutory Units

PSUs enable you to group legal employers so that you can perform statutory calculations at a higher level, such as for court orders and some taxes. In some cases, a legal employer is also a PSU. However, your organization may have several legal employers under one PSU. A legal employer can belong to only one PSU, and the PSU represents the highest level of aggregation for a person. No balances are aggregated across PSUs.

How you define a legal entity depends on how you plan to use it.

If your implementation includes	Then you need to
Oracle Fusion Human Capital Management	Define the legal entity as a legal employer. HCM implementations require legal employers.
Oracle Fusion Global Payroll	Define the legal entity as a PSU.
Multiple legal employers	For tax reporting purposes, you can associate your legal employers with a single PSU. If you don't want the legal employers to report together, you must segregate them by PSU.

Payroll Statutory Units and Legal Reporting Units

PSUs and legal reporting units (LRUs) have a parent-child relationship, with the PSU being the parent. An LRU is the lowest level component of a legal structure that requires registrations.

Legal Reporting Units, Tax Reporting Units, and Reporting Establishments

LRUs have a parent-child relationship with tax reporting units (TRUs) and reporting establishments.

TRUs:

• Group workers and retirees for the purpose of tax reporting

• Represent a part of your enterprise with a specific statutory or tax reporting obligation

If you're using the for tax reporting purposes, then you must configure it as a TRU. When you create an LRU that belongs to a legal employer (that's not also a PSU), you must select a parent PSU. In this way, TRUs are indirectly associated with a legal employer by association with their PSU.

TRUs capture your:

• US federal employer identification number (EIN)

• State EIN

• Registration details

  Note: This captures the federal EIN, not the TRU itself.

• Statutory registered name

• Form 1099-R distribution code

  If a PSU is paying into multiple distributions, you must define separate TRUs for each code.

  Note: The payroll process doesn't use these codes to determine tax withholding. Instead, it uses the following hierarchy:

A reporting establishment is an organization used for HR statutory reporting. Use the Reporting Establishments task in your implementation project to identify your TRUs as reporting establishments.

For further info, see Options for Identifying Legal Reporting Units as Reporting Establishments in the Help Center.

Tax Reporting Units and Legal Employers

TRUs are indirectly associated with a legal employer through their PSU. A single legal employer can use one or more TRUs, and one or more legal employers can use a TRU.

For example, assume a single TRU is linked to a PSU. Assume also that two legal employers are associated with this PSU. In this case, both legal employers would be associated with the single TRU.

Use the Legal Reporting Unit HCM Information task to designate an existing legal reporting unit as a TRU and reporting establishment. If you create a LRU that belongs to a legal employer (that's not also a PSU), you select a parent PSU and then, when you run the Legal Reporting Unit HCM Information task, you designate it as a TRU and select the legal employer.