How do I define my own wage basis rules?

There are no predefined wage basis rules at the local level, such as city, county, or school district. While most local wage basis rules follow their state wage basis rules, there are a few states where the local wage basis rules differ. You must create the local wage basis rules in these cases.

For example, at the Ohio city level, Deferred Compensation 401k and Deferred Compensation 401k Catch Up are subject to tax. At the Kentucky local level, all Pretax Section 125 secondary classifications are taxable, such as Dental Care 125, Dependent Care 125, and Vision Care 125.

Create wage basis rules using the Component Group Rules task.

1. Start the Component Group Rules task.

2. In the tree structure, select Regional.

   To define wage basis rules at the federal level, select Federal.

3. Expand Related deductions and then the child node appropriate to the tax.

4. Select Wage Basis Rules.

5. In Wage Basis Rules, click Create.

6. In Create Wage Basis Rule, enter the following.

   Field name	What you enter
   Effective Start Date	Use either the implementation date or the earliest date a pay period exists.
   State	Full state name or the 2-character state abbreviation, such as OH. How you configured you state name settings determines how the values appear in this field. For further info, see Configure State Style Formats in the Help Center.
   County	Specify the appropriate county from the list, such as Franklin.
   City	Specify the appropriate city from the list, Columbus.
   Primary Classification	Select the primary classifications to be used in the wage basis. For example, city tax rules most commonly use: Imputed Earnings Pretax Deductions Supplemental Earnings
   Select all secondary classifications	If you select Yes for Subject to Wage Basis Rule below, you must select No here.
   Secondary Classification	Select an appropriate secondary classification, such as Deferred Compensation 401k and Deferred Compensation 401k Catch-Up.
   Subject to Wage Basis Rule	If you select Yes here, you must select No for Select all secondary classifications.

7. Click Submit.

   You may need to query by state to view the data you created. If so, enter a value in the field directly above State for the state entered in the previous step. This filters the data in the UI for that state. If a blank field isn't available for entry above State, click Filter.

   These rules are stamped with the LDG and aren't overwritten by subsequent upgrades or patches.

8. Repeat these steps for each combination of primary classification, secondary classification, and jurisdiction (state, county, or city) that needs updating.

9. Complete a review of all secondary classifications impacted to determine which entries require corrections.

   For example, when working with pretax deductions, determine what Section 125 secondary classifications are impacted for a state-county-city or state-county combination. There could be a difference between the treatment of HSAs, FSAs, Dental, Vision, Healthcare, and Dependent Care. One or more may need corrections where others may not.