When do I create wage basis rules?

Title and music.

In this video I’ll show an example of when to create wage basis rules.

Wage basis rules impact both an employee’s earnings and their tax deductions. In this example, we’ll focus on tax deductions and how an employee’s earnings (that’s included in wage basis) can vary depending upon where they live.

Brittany is a salesperson at Supremo who works for the company’s East Coast district in New York. She receives a salary of $15,000 each month and drives a company car.

Cindy is a salesperson at the same company and is a part of the East Coast district in Pennsylvania. She too receives a salary of $15,000 each month and drives a company car.

Both Brittany and Cindy are responsible for reporting their “Personal Use” of the company car so that the correct taxes can be deducted according to the laws of their respective states. In the State of New York, Brittany is taxed for her personal use of the car. However, in Pennsylvania, Cindy isn’t taxed for her personal use of the car.

Last month, both Brittany and Cindy reported personal use of the car totaling $50 in their respective states. And here’s how it impacts their taxable amounts.

When setting this up in the system, there are a few areas you want to check.

The element classifications
The element creation for Company Car
Verify existing wage basis rules for the secondary classification
And test your data

I’ll first need to ensure that the primary element classification “Imputed Earnings” and the secondary classification “Personal Use of Company Car” are both present in the system.

From the Home page, click My Client Groups.

In the Quick Actions section, click Show More.

In the Payroll section, I’ll click Element Classifications.

In the Payroll section, click Element Classifications.

I’ll search for and confirm that Imputed Earnings appears as a primary classification and select it.

On the Element Classifications page in the Name field, enter Imputed.

In the Legislative Data Group drop-down list, select US Legislative Data Group.

Click Search.

In the Search Results section, click Imputed Earnings.

And then confirm that Personal Use of Company Car appears in the Secondary Classifications section.

On the Element Classifications: Imputed Earnings page in the Secondary Classifications section, notice the Personal Use of Company Car item.

Then I’ll check that the Company Car element was created.

From the Home page, click My Client Groups.

In the Quick Actions section, click Show More.

In the Payroll section, I’ll select Elements.

In the Payroll section, click Elements.

And confirm that the company car element has been created.

On the Elements page, in the Element Name field, enter AT Company Car.

In the Legislative Data Group drop-down list, select US Legislative Data Group.

Click Search.

In the Search Results section, click AT Company Car.

Notice when I click on the element, notice that the Primary Classification is Imputed Earnings and the Secondary Classification is Personal Use of Company Car.

On the Element Summary: AT Company Car page in the Element Details section, highlight the Primary Classification and the Secondary Classification selections.

I can now see that the Recurring entry is set to Nonrecurring and that the Employee Level is set at the Assignment level.

Which means a manual entry must be made for this element to be processed for an employee’s assignment.

In the Standard Rules section, highlight the Recurring entry and Employment Level selections.

Next, I’ll verify the existing wage basis rules for the secondary classification.

From the Home page, click My Client Groups.

In the Quick Actions section, click Show More.

In the Payroll section, I’ll click Component Group Rules.

In the Payroll section, click Component Group Rules.

After searching by the legislative data group, I’ll click on Regional.

On the Component Group Rules page in the Legislative Data Group drop-down list, select US Legislative Data Group.

Click Search.

In the Search Results section, click Regional.

Then under Related Deductions, for State Tax, I’ll click Wage Basis Rules.

On the Component Group Rules Regional page, on the left navigation under Regional > Related Deductions > State Tax, click Wage Basis Rules.

I’ll first filter by the Secondary Classification for Personal Use of Company Car and notice that New York is not listed.

In the blank field above Secondary Classifications, enter Personal Use of Company Car.

Press the Enter key.

So, I’ll create a wage basis rule for New York.

In the State Tax: Wage Basis Rules section, click Create.

I’ll enter in the required information and ensure that the Select all secondary classifications field is set to No. The Secondary Classification field is set to Personal Use of Company Car. And that the Subject to wage basis rule is set to Yes. Then, I’ll submit it.

In the Create Wage Basis Rule window in the Effective Start Date field, enter 1/1/2023.

In the State drop-down list, select NY.

In the Primary Classification drop-down list, select Imputed Earnings.

For the Select all secondary classifications option, select No.

In the Secondary Classifications drop-down list, select Personal Use of Company Car.

For the Subject to wage basis rule option, select Yes.

Click Submit.

And at the Warning message, I’ll click OK.

At the Warning message, click OK.

And now New York has been added to the list.

Lastly, I’ll run a QuickPay to test my data and see that the earnings calculated for Brittany was $15,000. And her taxable benefits are $50. If I drill down, I’ll see that $50 is for the company car. And the balance for the SIT Subject Withholdable, is exactly what we expected. And I can also confirm that Cindy wasn’t taxed for her company car use.

For more information on this topic, you can view the courses on Oracle University or reference the available guides on Oracle Help Center.

Thanks for watching.