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 on Calculation Component Details of the FIT component.
	Regular and Supplemental Tax Calculation Method	Indicates how the process taxes regular and supplemental earnings. You can select the following. Concurrent Aggregation Default Method Tiered Flat Rate Combined Do this on Enterable Calculation Values on Calculation Cards of 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 on Calculation Component Details of 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 on Calculation Component Details of 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 on Enterable Calculation Values on Calculation Cards of the FIT component.
	Tax Exemption	Provides options for exempting FIT wages and taxes. You can select the following. Not exempt Exempt from tax withholding Exempt from wage accumulation and tax withholding Do this on Enterable Calculation Values on Calculation Cards of the FIT component.
Medicare	Self-Adjustment Method	You can select the following. No self adjust Payroll process doesn't perform any adjustments based on changes to tax rates. You are responsible for ensuring the correct withholding values for your employees. Self adjust Payroll process performs adjustments for rate changes during the first available payroll run. It bases the withholding calculations on year-to-date earnings rather than earnings within a pay period. This method provides the most accurate calculation. Self adjust at maximum Payroll process takes no action until an employee reaches their yearly maximum wage limit. Then it performs any adjustments during the first available payroll run. Do this from Calculation Component Details on the Medicare component.
	Employee Tax Exemption	Provides options for exempting Medicare employee wages and taxes. You can select the following. Not exempt Exempt from tax withholding Exempt from wage accumulation and tax withholding Do this on Enterable Calculation Values on Calculation Cards of the Medicare component.
	Employer Tax Exemption	Provides options for exempting Medicare employer wages and taxes. You can select the following. Not exempt Exempt from tax withholding Exempt from wage accumulation and tax withholding Do this on Enterable Calculation Values on Calculation Cards of the Medicare component.
Federal unemployment insurance (FUTA)	Employer Self-Adjustment Method	You can select the following. No self adjust Payroll process doesn't perform any adjustments based on changes to tax rates. You are responsible for ensuring the correct withholding values for your employees. Self adjust Payroll process performs adjustments for rate changes during the first available payroll run. It bases the withholding calculations on year-to-date earnings rather than earnings within a pay period. This method provides the most accurate calculation. Self adjust at maximum Payroll process takes no action until an employee reaches their yearly maximum wage limit. Then it performs any adjustments during the first available payroll run. Do this on Calculation Component Details of the Federal Unemployment component.
	Employer Tax Exemption	Indicates options for exempting FUTA wages and taxes. You can select the following. Not exempt Exempt from tax withholding Exempt from wage accumulation and tax withholding Do this on Enterable Calculation Values on Calculation Cards of the Federal Unemployment component.
	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. Do this on Enterable Calculation Values on Calculation Cards of the Federal Unemployment component.
Social Security	Self-Adjustment Method	You can select the following. No self adjust Payroll process doesn't perform any adjustments based on changes to tax rates. You are responsible for ensuring the correct withholding values for your employees. Self adjust Payroll process performs adjustments for rate changes during the first available payroll run. It bases the withholding calculations on year-to-date earnings rather than earnings within a pay period. This method provides the most accurate calculation. Self adjust at maximum Payroll process takes no action until an employee reaches their yearly maximum wage limit. Then it performs any adjustments during the first available payroll run. Do this on Calculation Component Details of the Social Security component.
	Employee Tax Exemption	Indicates options for exempting Social Security employee wages and taxes. You can select the following. Not exempt Exempt from tax withholding Exempt from wage accumulation and tax withholding Do this on Enterable Calculation Values on Calculation Cards of the Social Security component.
	Employer Tax Exemption	Indicates options for exempting Social Security employeer wages and taxes. You can select the following. Not exempt Exempt from tax withholding Exempt from wage accumulation and tax withholding Do this on Enterable Calculation Values on Calculation Cards of the Social Security component.
Limit taxes	Federal Tax Limit Enforcement Level	Define how the payroll process tracks limits for federal limit taxes. You can select the following. Payroll Statutory Unit Tax Group Tax Reporting Unit Do this on Enterable Calculation Values on Calculation Cards of the FIT component.

To define these calculation rules:

Start the Legal Entity Calculation Cards task from your implementation project, and open the card.
Select Federal.
Provide the effective date, and select the appropriate calculation component.
In Details, set the values you want to use.
Click Save and Close.