Federal Income Tax Look-Back Rule

The federal income tax (FIT) look-back rule helps define how the payroll process calculates an employee's FIT withholding. This rule is enabled by default.

When enabled, the process evaluates the employee's FIT withholding across the prior and current years. If it finds they haven't withheld FIT from their wages, it taxes any supplemental earnings using the aggregate tax method instead of the flat rate.

Manage this rule for your organization

To set this rule for your organization:

1. Start either the Legal Entity Calculation Cards or Legal Reporting Unit Calculation Cards task from your implementation project.

   Settings on the tax reporting unit card override those on the payroll statutory unit card.

2. Select the organization card for editing.

   Create it if it doesn't exist.

3. Enter an effective date, and select Federal.

4. Select Federal Income Tax.

5. Click Enterable Calculation Values on Calculation Cards.

6. Click Create.

7. For Enforce Federal Income Tax Look-Back Rule, select Yes or No as appropriate.

8. Click Save and Close.

Manage this rule for an individual employee

To set this rule for an individual employee:

1. From My Client Groups, click Payroll.

2. Click Calculation Cards.

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

4. Select Federal.

5. Click Edit and then Update.

6. For Enforce Federal Income Tax Look-Back Rule, select Yes or No as appropriate.

7. Click Save and Close.