Configure Wage Basis Rules for Pretax Deductions for the US
In this example, you want to define state-level wage basis rules so that:
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Supplemental earnings are taxable
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Pretax deductions reduce taxable wages
Taxing Supplemental Earnings
With these steps, you identify supplemental earnings as eligible for California state taxes.-
Start the Component Group Rules task.
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Search for your US legislative data group.
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Expand Regional, then Related Deductions, and then State Tax.
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Select Wage Basis Rules, and click Create.
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Enter an effective start date.
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Select CA as the state.
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Select the Supplemental Earnings primary classification.
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Select the secondary classification.
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Identify this as subject to the wage basis rule.
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Click Submit.
Reducing Taxable Wages
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No action is required for the pretax deductions to reduce taxable wages. Deductions of this type automatically reduce when you process payroll.
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To change an existing pretax deduction from reducing gross wages to not reducing gross wages, define a wage basis rule.