Global Uptake: Taxation of Retroactive Earnings After TRU Transfers

The US has taken up this global feature. When processing a tax reporting unit (TRU) transfer for the same assignment, you now have the option to tax retroactive earnings based on either the source or the target TRU. This new option allows you to define how to tax retroactive earnings following a TRU transfer. The options are:

  • Y or blank: Date Earned -- Retroactive earnings are taxed based on the source (or original) TRU – this is the existing and default behavior
  • N: Date Paid -- Retroactive earnings are taxed based on the target (or current) TRU

This feature provides the ability to process negative retroactive entries in the target (or current) TRU after a TRU transfer occurs. These negative entries are no longer ignored in the payroll process because of the association to the source (or original) TRU. For example, in the case where a TRU transfer occurs for a single assignment, and the TRU Rule for Retro Entries parameter has been set to ‘N’, the negative retroactive entries will now be processed in the target (current) TRU, and employees are no longer overpaid.

Provides the flexibility to meet the business requirements for the taxation of retroactive earnings when TRU transfers occur for the same assignment.

Steps to Enable

To change the existing default behavior to tax retroactive earnings based on the date paid, and use the target TRU, add the Process Configuration Group parameter TRU Rule for Retro Entries. By default, the action parameter TRU Rule for Retro Entries doesn't exist in the Action Parameter Group. If you want to override the default behavior, you must add this parameter with a value of N. Use the Payroll Process Configuration page, under My Client Groups, to add the parameter and override the value, if required.

Tips And Considerations

Note these important considerations for this feature:

  • Once this rule is set, don't change it for each payroll run.
  • You don’t have to do anything unless you want to change the current behavior.
  • This feature doesn't support multiple assignment scenarios. It only supports TRU transfers of the same assignment.
  • This feature is available for new elements only. When processing Absence elements that reduce regular salary, both the Absence and the Regular Salary elements must be new elements.