Tax Annualization for Standard Earnings

When you define a Standard Earnings element, you can configure it to:

• Process separately but pay with other earnings

• Process separately and pay separately

If you select Yes for one of these options, the template asks if you want to tax the earning across multiple pay periods. If you agree, the template applies a Taxation Pay Periods input value to the element. This value sets the annualization calculation factor.

You use the Taxation Pay Periods input value to set the number of pay periods for the earnings' tax annualization.

Example of tax annualization

Here's how different values can impact federal income tax (FIT) calculations for a semimonthly pay period, assuming the employee is claiming Single / Zero and using 2018 withholding tables.

Taxation Pay Periods value	For this annualized pay amount	Performs this calculation	This is the tax withheld
Blank (pay periods determined by the payroll calendar)	$2,500 semimonthly earnings * 24 pay periods = $60,000	60,000 - 42,400 = $17,600 17,600 * 22 percent = $3,872 3,872 + 4,453.50 = $8,325.50 8,325.50 / 24 = $346.90	$346.90
9	$2,500 semimonthly earnings * 9 pay periods = $22,500	22,500 - 13,225 = $9,275 9,275 * 12 percent = $1,113 1,113 + 952.50 = $2,065.50 2,065.50 / 9 = $229.50	$229.50
18	$2,500 semimonthly earnings * 18 pay periods = $45,000	45,000 - 42,400 = $2,600 2,600 * 22 percent = $572 572 + 4,453.50 = $5,025.50 5,025.50 / 18 = $279.19	$279.19