How Do I Create and Verify Wage Basis Rules

This topic demonstrates how you can set up and verify wage basis rules for an employee whose earnings vary depending on where the employee lives.

Brittany is a salesperson of a company and she uses the company car, the use of which she has to report in order to be taxed properly.

Brittany works in her company's East Coast district, and she spends 50 percent of her time in New York and 50 percent of her time in Pennsylvania.

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

• She receives a salary of 2,000 each month.
• 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.

Set Up and Verify the Wage Basis Rules

Use these tasks to set up the wage basis rules for Brittany and verify that her tax calculations meet the requirements as given in the previous section.

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. Click 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
   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 Wage Basis Rules
   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.

      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.

      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.

4. Run Quick Pay for Brittany and View SOE
   1. Use the Calculate QuickPay task to run a QuickPay for Brittany.
   2. After the QuickPay process is complete, click the Verify Payroll Results task in the checklist.
   3. On the View Person Process Results page, click Brittany in the Search Results.
   4. In the Statement of Earnings section, view the Earnings and Taxable Benefits.
   5. Click on the Taxable Benefits amount to confirm that the calculations are for the company car.
   6. Use the Actions menu to view the Run Results. Use the filter option on the page to view the calculations for SIT Subject Withholdable balance.