Calculation Rules for Federal Taxes

You can define the following calculation rules on the organization cards.

Tax type

What you can select

What it does

Federal income tax (FIT)

Supplemental Tax Calculation Method

Indicates how the process taxes supplemental earnings. You can select the following.

  • Aggregation

  • Flat Percentage

Do this from Calculation Component Details for the FIT component.

Tax Withholding Rules

Taxes all earnings based on withholding rules.

You can select the following.

  • All states

  • Only states under state tax rules

    If you select this, you must add those states in Regional Component Group.

Do this from Calculation Component Details for the FIT component.

Enable Period-to-Date Tax Calculation

By default, multiple regular payroll runs in the same period are taxed as if they're individual payments.

When you set this to Yes, multiple payroll runs are taxed as if they're paid as one payment. This option can possibly increase the tax bracket.

Do this from Calculation Component Details for the FIT component.

Note:

This applies to state income tax (SIT) as well.

Aggregate Overtime Premium Rate for all TRUs within the PSU

Determines how to calculate the premium overtime rate of multiple tax reporting units (TRUs) under the same payroll statutory unit (PSU).

Do this on the Overtime Rules calculation component.

Enforce Federal Income Tax Look-Back Rule

Determines if the payroll process withholds FIT from the employees' supplemental earnings using the aggregate tax method instead of the flat rate.

Do this from Enterable Calculation Values on Calculation Cards for the FIT component.

Medicare

Self-Adjustment Method

Evaluates the earnings and tax amounts to ensure they're correct with a given tax rate. When all subject earnings reach the annual maximum limit, the payroll process no longer calculates the tax.

Federal unemployment insurance (FUTA)

Employer Self-Adjustment Method

Evaluates the earnings and tax amounts to ensure they're correct with a given tax rate. When all subject earnings reach the annual maximum limit, the payroll process no longer calculates the tax.

Federal Unemployment Employer Rate override

If you have locations in a FUTA credit reduction state, your FUTA rate might change. FUTA credit reduction rates are predefined for each of the states that require a credit reduction and are updated annually.

In certain circumstances, you must override these rates. Use the Calculation Value Definitions task to set an override rate.

Social Security

Self-Adjustment Method

Evaluates the earnings and tax amounts to ensure they're correct with a given tax rate. When all subject earnings reach the annual maximum limit, the payroll process no longer calculates the tax.

Limit taxes

Federal Tax Limit Enforcement Level

Define how the payroll process tracks limits for federal taxes.

State Tax Limit Enforcement Level

Define how the payroll process tracks limits for state taxes.

To define these calculation rules:

  1. Start the Legal Entity Calculation Cards task from your implementation project, and open the card.

  2. Select Federal.

  3. Provide the effective date, and select the appropriate calculation component.

  4. In Details, set the values you want to use.

  5. Click Save and Close.