Create Wage Basis Rules

This topic demonstrates how you can set up wage basis rules for an employee, for example Brittany, whose earnings vary depending on the work location of the employee.

Let's consider the following to understand how we can set up the wage basis rules for Brittany:

• She receives a monthly salary of 2,000.
• Last month, Brittany reported a total personal use of the car amount of 100. She spent 50 percent of it in New York and 50 percent of it in Pennsylvania.
• In New York, imputed earnings such as personal use of company car amounts are included in the taxable wages.
• In Pennsylvania, Brittany isn't taxed for her personal use of the company car.

The tasks required to create the wage basis rules for Brittany is given here. Follow the steps detailed under each task to create the wage basis rules.

1. Verify Availability of Element Classifications

Check if the secondary classification of Personal Use of Company Car is available under the primary classification of Imputed Earnings for an US LDG.

1. Select the Element Classifications quick action under Payroll on your Home page.
2. On the Element Classifications page, select the US Legislative Data Group.
3. In the Name field enter Imputed Earnings and search.
4. Select the Imputed Earnings row in the search results section.
5. On the Element Classifications: Imputed Earnings page, confirm that Personal Use of Company Car is available in the Secondary Classifications section.

   If you dont see the Personal Use of Company Car secondary classification, use the Add icon to create the secondary classification.

2. Create an Element for Usage of Company Car

Follow these steps to create an element for usage of company car.

1. Use the Elements quick action under Payroll to confirm if an element, for example, AT Company Car, exists for computing the taxes for personal use of company car.
2. On the Elements page, select the US Legislative Data Group.
3. In the Name field enter AT Company Car and search. If the element doesn't exist create the element.
4. Confirm that the element has Imputed Earnings as the Primary Classification and the Secondary Classification is Personal Use of Company Car.
5. In the Standard Rules section, set the Recurring entry to Nonrecurring and the Employee Level to Assignment.

3. Create the Wage Basis Rules

Follow these steps to create the wage basis rules for Brittany.

1. Use the Component Group Rules quick action under Payroll on your Home page, and navigate to Regional > Related Deductions > State Tax.
2. On the Component Group Rules page, select the US Legislative Data Group and click Search.
3. Click Regional in the search results section.
4. Navigate to Regional > Related Deductions > State Tax, and click Wage Basis Rulesto create the wage basis rule.
5. In the State Tax: Wage Basis Rules section, enter Personal Use of Company Car in the blank field above Secondary Classifications, and click Enter.
6. Use the Add icon to create a wage basis rule for the state of New York. In the Create Wage Basis Rule window, enter the following as shown in this table.

   Create Wage Basis Rule

   Field	Value
   Effective Start Date	Enter an appropriate date.
   State	NY
   Primary Classification	Imputed Earnings
   Select all secondary classifications	No
   Secondary Classifications	Personal Use of Company Car
   Subject to wage basis rule	Yes

7. Click Submit.
8. Confirm that for Pennsylvania the Use in Wage Basis value is set to N for the Primary Classification of Imputed Earnings.

You can see that New York is now added to the Wage Basis Rules listed under Sales Tax.

Run a QuickPay for Brittany and check the State of Earnings to verify that the Calculated Earnings, the Imputed Earnings, Taxable Amounts, and Deductions are as expected for both Pennsylvania and New York.