SAP US Payroll Tax Class

8/10/2019 SAP US Payroll Tax Class

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SAP US Payroll Tax Classmore than you ever wanted to know about SAP Payroll taxes

SAP Tax Terminology................................................................................................................................................ 1Tax Calculation Process........................................................................................................................................ ... 2

Process Overview............................................................................................................................................. 2Data Model............................................................................................................................................................... 3

n!oty"es........................................................................................................................................................... 3Con!iguration o! Taxes.............................................................................................................................................. #

M$ % m"lementation $uide Ste"s..................................................................................................................#Tax Com"anies............................................................................................................................................... 1&'oad Tax Data................................................................................................................................................. 12Tax Data Maintenance % Tax Aut(orities......................................................................................................... 13Tax Data Maintenance % Tax Ty"es................................................................................................................ 1)Tax Data Maintenance % Tax Areas.................................................................................................................1*Tax Data Maintenance % Tax Models............................................................................................................ ..2&+se!ul ,e"orts................................................................................................................................................ 2-Tax Data Maintenance % +nem"loyment nsurance............................................................................... ........2)Tax Data Maintenance % Tax Overrides.......................................................................................................... 2)Tax Data Maintenance % Sym olic Account S"lit............................................................................................ 2*Priority o! Tax /agety"es........................................................................................................................... .... 2*

Tax /agety"es....................................................................................................................................................... 20Descri"tions o! tax wagety"es........................................................................................................................ 20'in ing tax wagety"es to ot(er tax data..........................................................................................................2#

$ross to et /agety"es.........................................................................................................................................31$ross +"s.............................................................................................................................................................. 32

Cas( or ,egular $ross u"s............................................................................................................................ 32o "ay $ross u"s........................................................................................................................................... 3-

Pro lems wit( $ross u"s................................................................................................................................ 3),econciling Taxa le /ages % o ,etrocalculation.................................................................................................3*,etrocalculations.................................................................................................................................................... 30

Cas( vs Tax Pers"ective.................................................................................................................................30$ross to et 45uation..................................................................................................................................... 306orming ,etro Di!!erences.............................................................................................................................. 30Claims............................................................................................................................................................. 3#

Taxation o! ,etrocalculations..................................................................................................................................71Tax /(en Paid 8T/P9 vs Tax /(en 4arned 8T/49.......................................................................................71:alanced ; +n alanced O!!sets.................................................................................................................... .71Tax Priority ; Ca"s......................................................................................................................................... 71,etroactive c(anges to gross u"s.................................................................................................................. 72Crossing


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SAP US Payroll Tax Class

SAP Tax Terminology

:usiness Term SAP Term De!inition

6ederal 4m"loyer D um er 864 9 Tax Com"any A legal entity !or tax re"orting "ur"oses

Tax Tax Ty"e T(e ty"e o! tax levied 8re5uired to e "aid9 y a tax aut(ority

6ormula 6ormula nstructions !or (ow to calculate a tax amount

/age :ase Tax Model A de!inition o! w(ic( wages and deductions are consideredtaxa le !or s"eci!ic tax aut(ority and ty"e o! tax

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Tax Calculation ProcessProcess Overview

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Taxn!oty"es

Ot(er n!oty"es

= TA>,= >D6,T=

+ := :A'9

SAP S"ecial Processing8sc(ema +T>&9

SAP Tax Pre"aration8sc(ema +T>&9


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Data ModelInfotypes

n!oty"e Title Descri"tion ? otes

2&* ,esident Tax T(is is t(e tax area w(ere t(e em"loyee lives. T(ey can only live in one "lace at a time=

and "ayroll reads t(is in!oty"e as o! t(e c(ec date.

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2&0 /or Tax T(is in!oty"e stores t(e various tax areas t(e em"loyee wor s in % t(ey can wor inmulti"le areas at once= and eac( is "ro rated y a certain @. T(e total @ can not e

more t(an 1&&. ! it is less t(an 1&&= t(e remainder is allocated to t(e resident tax area.Payroll reads all t(e in!oty"e 2&0 s active during t(e "ay "eriod and "ro rates wagesaccording to eac( in!oty"e 2&0 occurrence.

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2 +nem"loyment State T(is in!oty"e contains t(e state and wor site t(e em"loyee is taxed in !or unem"loymenttaxes. 6or "ayroll calculations it is read as o! t(e "eriod end date. ! t(e wor site is !illedin t(en you can use SAP s Multi"le /or site ,e"orts in Tax ,e"orter.

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21& /it((olding n!o T(is in!oty"e stores t(e / 7 or state e5uivalent in!ormation needed !or calculatingwit((olding taxes. t is read as o! t(e c(ec date. Barious tax aut(orities use di!!erent!ields on t(is in!oty"e= and t(e availa le !ields c(ange de"ending on t(e tax aut(orityentered 8w(ic( is also t(e su ty"e9.

Tax 4xem"t ndicator codes control w(ic(wages ; taxes getcalculated > notaxa le wages ortaxesE , don t ta etaxes ut do re"orttaxa le wagesE < don t ta e taxes anddon t calculatere"orta le or taxa lewages.

De!. 6orm. o. is t(ede!ault !ormulanum er SAP will use!or t(e tax % and t(atcan e overriddenwit( t(e FAssign6orm. o. !ield.

6or ot(er !ields=select t(em and"ress 61 !or t(e SAP(el" text.

T(is screen layoutwill c(ange !rom onetax aut(ority toanot(er.

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237 Tax Overrides T(is in!oty"e contains various overrides !or calculating wit((olding taxes= and is read aso! t(e c(ec date.

Su""lemental

met(od Manywit((olding taxes(ave an o"tional !latrate met(od t(at can

e used. Some (avemore t(an onesu""lementalmet(od % (ere wecan override t(esu""lementalmet(od !or anem"loyee s"ayc(ec s.

Override amountT(is amount willoverride anywit((olding taxamount calculated yt(e system.

4m"l. Overridegrou" T(is is a codecreated in :S t(atde!ines a custom taxcalculation= suc( asa custom !lat rate !orcertain onus"ayments. T(eoverride grou" (as to

e created in :Sand t(en a""lied(ere.

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23- Ot(er Taxes T(is in!oty"e contains overrides !or all ot(er taxes t(an wit((olding= and is read into"ayroll as o! t(e "eriod end date.

T(e !ormula num ers

and F4xe.8exem"tionindicators9 used (ereserve t(e same"ur"ose as t(ey doon in!oty"e 21&= ut!or everyt(ing exce"twit((olding taxes.

n!oty"e 21& iswit((olding taxesonly= and 23- is !orall ot(er tax ty"es.

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Configuration of TaxesIM ! Implementation uide Steps

Transaction SP,O is used to access t(e SAP m"lementation $uide. T(e transaction will !irst dis"lay variousF"roGect M$s = "ress 6- or t(e 4nter"rise M$ utton to get to t(e com"lete M$ structure. O"en t(e Payroll

Accounting H Payroll +SA H Tax section.! you do not (ave access to transaction SP,O= you can view t(e corres"onding ta les wit( transaction S41) 8Data

:rowser9.

To get more documentation= dou le clic on a line s text. 6or exam"le= dou le clic on t(e FTax text line and you gett(is documentation

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Tax Companies

T(is is t(e ste" w(ere Tax Com"anies are de!ined and t(en assigned to eac( "ersonnel area?su area com ination.T(e tax com"any is not t(e same as t(e Com"any Code 8or accounting com"any9 t(at is seen on in!oty"e 1. n!act= Tax Com"any does not dis"lay on in!oty"e 1. T(e in!ormation entered in t(e FDe!ine tax com"anies 8ta let-utl9 ste" is used !or regulatory tax re"orting 8Tax ,e"orter9. T(e screen elow s(ows w(ere Tax Com"any isassigned to t(e "ersonnel area?su area 8ta le t-u&"9

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T(e Tax Com"any is w(ere taxes ; taxa le wages are re"orted !or regulatory "ur"oses. T(e accounting de its ;credits go to t(e Com"any Code on in!oty"e 1= w(ic( may or may not corres"ond to t(e Tax Com"any. 6orexam"le= t(is screen s(ows t(at taxes and taxa le wage are re"orted to t(e government under FOverseas = and t(edescri"tion on t(e "ersonnel area says t(e accounting goes to Com"any Code &&1.

4ac( tax com"any is identi!ied y an em"loyer D num er !or every tax aut(ority it re"orts to. T(ose em"loyer Dnum ers 84 s9 are entered in t(e FDe!ine tax identi!ication num ers y :S tax com"any ste" 8t-ut(9= and t(enassigned to a tax ty"e wit(in t(e tax aut(ority in t(e FDe!ine !ederal?state?local em"loyer D num er ste" 8ta let-uti9. SAP Payroll will not calculate a tax i! t(e corres"onding 4 does not exist in t(ese ta les.

"oad Tax Data

T(is section is "rimarily !or t(e !irst time system setu"= w(ere we co"y some data !rom t(e :S Tax Calculationsystem into SAP ta les. t is normally maintained y "eriodic u"dates to t(e system t(at come !rom SAP.

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SAP US Payroll Tax ClassTax Data Maintenance ! Tax Aut#orities

T(e FC(ec tax aut(orities ste" 8ta le t-utI9 is used to con!igure certain o"tions !or eac( tax aut(ority. T(is data isdelivered y SAP and normally it is also u"dated y t(em as new tax aut(orities come into existence.


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T(e FSort no. controls t(e se5uence in w(ic( t(e tax aut(orities will e dis"layed in select lists. T(e F/7 indicatorcontrols w(et(er o! not you want to re5uire an in!oty"e 21& !or t(e tax aut(ority= ma e it o"tional= or not allow one toexist. T(e ,S column is to indicate w(t(er o! not you want to a""ly t(e ,S 1& exem"tion limit rule to t(e aut(ority.T(e F o+S column is used to indicate +S Territories ; Possesions= suc( as Puerto ,ico and t(e +S Birgin slands.T(e next M$ ste"s FC(ec sort num er !or aut(ority = FC(ec / 7 and exem"tion limit indicators = and FC(ecstatus o! territories are Gust di!!erent views on t(is same in!ormation.FC(ec tax aut(ority ma""ing 8ta le :T>TA>C9 is w(ere we ma" t(e SAP Tax Aut(ority code to t(e :S Tax

Aut(ority code. T(is is normally maintained y SAP and does not re5uire customer maintenance. :S (as its owncodes !or eac( tax aut(ority= ut lets t(e customer create w(atever codes t(ey want to use. T(ose customerde!ined codes are ma""ed to t(e :S codes (ere.

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4ac( tax aut(ority can (ave its own set o! valid !iling status codes= and t(ese are controlled in t(e FDe!ine valid!ilings statuses ste" 8ta le t-ut 9. T(is data is generally maintained and u"dated y SAP.

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Tax Data Maintenance ! Tax Types4ac( tax aut(ority can (ave one o! more di!!erent ty"es o! tax t(ey collect. All t(e various tax ty"es are de!ined int(is ste".

FC(ec tax ty"es 8ta le t-utt9 is a list o! all valid tax ty"es= and FMaintain tax ty"es "er tax aut(ority 8ta le t-utd9 isw(ere we de!ine w(ic( tax ty"es are valid !or eac( aut(ority.

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Tax Data Maintenance ! Tax Areas A Tax Area is sim"ly a collection o! tax aut(orities t(at are a""lica le to a given location. 6or exam"le= i! you liveinside Cincinnati= your tax area would include Cincinnati= O(io and 6ederal. SAP assigns tax areas to resident andwor locations.

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6or eac( tax area we de!ine t(e tax aut(orities t(at corres"ond to it in t(e FMaintain tax aut(orities "er wor taxarea ste" 8ta le t-utw9. So (ere we see t(at wor tax area A'&J includes tax aut(orities Ala ama and Ke!!erson.

,esident tax areas are setu" in a similar manner= ut stored in ta le t-uta. 'i ewise= resident tax areas are storedin ta le t-utr. ,esident tax areas (ave additional !unctionality t(at ena les t(e system to suggest a list o! tax areast(at may e valid !or t(e em"loyee= ased on t(e em"loyee s Ii" code. T(e FMaintain Ii" code ranges "erresidence tax area 8ta le t-ut!9 s"eci!ies a range o! Ii" codes !or eac( tax aut(ority. /(en a new in!oty"e 2&* iscreated= t(e system will searc( t(is ta le wit( t(e em"loyee s Ii" code to get a list o! tax areas t(at mig(t ea""ro"riate !or t(e em"loyee. Alt(oug( a Ii" code range exists !or wor tax areas= t(ere is no ot(er system!unctionality to su""ort t(at "rocess 8i.e it doesn t wor 9.

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Tax Data Maintenance ! Tax Models

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SAP US Payroll Tax ClassT(e Tax Model is w(ere we de!ine t(e taxa ility o! wages in SAP Payroll. T(e Fmodel is a set o! t(ree SAPcon!iguration ta les. T(e !irst ste" FDe!ine tax aut(ority model 8ta le t-ute9 is w(ere we associate eac( tax aut(oritywit( a two digit model num er. T(e model num er is Gust an ar itrary two digit num er t(at was c(osen at t(e timet(e system was !irst setu". ! a tax aut(ority c(anges t(e way it taxes earnings or deductions= t(en you would createa new tax model !or it= using t(e e!!ective dates in t-ute.

T(e second ste" is FDe!ine taxa ility model = or ta le t-utm. n t(is ta le we lin eac( taxa le wagety"e to a taxmodel. T(ere are !our as"ects to t(is lin % t(e resident= wor and unem"loyment taxation o! t(e wagety"e= and t(etaxation !or di!!erent grou"s o! em"loyees 8t(e tax modi!ier9. T(e lin to t(e wagety"e is via "rocessing class *1 %called t(e taxa ility class. 6or eac( taxa ility class we s"eci!y i! t(e wagety"e is taxa le !or t(e tax aut(ority anem"loyee lives in= wor s in= and !or unem"loyment taxes. T(ese t(ree settings can e customiIed "er tax modi!ier.6or exam"le= we may tax wages !or every tax aut(ority !or regular em"loyees= ut only tax wages !or 6ederal !orex"atriates. n t(at case= we "ut ex"atriates and regular em"loyees in di!!erent tax modi!iers= and control t(eassignment o! wagety"es to tax aut(orities via ta le t-utm.

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SAP US Payroll Tax ClassTa le t-utm is w(ere we lin t(e tax aut(ority and tax ty"es to t(e wagety"e

Tax model T(e code !or a tax aut(ority= !rom t-ute ,es?wr ?+ , resident tax= / wor tax= + unem"loyment tax Tax Modi! T(e tax modi!ier !or t(e em"loyee Tax Class T(e "rocessing class *1 value !or t(e wagety"e Tax ty"e com ination A code !rom t-uty t(at s"eci!ies w(ic( tax ty"es t(e wagety"e is taxa le !or

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SAP US Payroll Tax Class T(e Tax Model Diagram s(ows (ow t(e ta les= in!oty"es and wagety"es come toget(er to tell t(e system w(ic( ?3xx taxa le wagety"es to create

Tax Model Diagram

Useful $eportsSAP (as a standard "rogram ,P+TMD+& 8J, H Payroll H Americas H +SA H Su se5uent activities H Periodinde"endent H Tools H Tax utilities H 4x"and tax models9 t(at reads t(e tax model ta les and s(ows w(ic( taxty"es are used !or eac( line o! t-utm. T(ere is also a standard re"ort t(at dis"lays all t(e tax aut(orities in t(esystem 8Dis"lay tax aut(orities on t(e Tax +tilities menu= or "rogram ,P+A+T+1= or view ta le t-utI viatransaction se1)9.

Tax Data Maintenance ! Unemployment Insurance4very state in t(e +S collects an unem"loyment tax to !und unem"loyment insurance claims. T(is is an em"loyer"aid tax= so t(ere is not e!!ect on t(e em"loyee. Jowever= eac( state (as its own tax rate and t(at tax rate can vary!rom one com"any to anot(er in t(e state. T(e com"any s"eci!ic tax rate is call t(e Fex"erience rate ecause it s

ased on t(e state s ex"erience in "aying out unem"loyment claims !or em"loyees laid o!! !rom a com"any. T(emore "eo"le a com"any lays o!!= t(e (ig(er t(e ex"erience rate. T(is ex"erience rate can c(ange every 5uarter.Client >>> does not "ay unem"loyment taxes ased on w(at is calculated in SAP. nstead= t(e total taxa leunem"loyment wages are multi"lied y t(e ex"erience rate outside o! SAP w(en t(e 5uarterly unem"loyment taxreturns are !iled.Some states re5uires com"anies to re"ort t(eir unem"loyment wages "er "(ysical site wit(in t(e state % t(is iscalled Multi"le /or site ,e"orting and is controlled via t(e wor site !ield on in!oty"e 2. Again= Client >>> doesnot use SAP !or its wor site re"orting so t(at "art o! t(e system is not used.

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Tax aut(ority model8t-ute9

Taxa ility model8t-utm9

Tax ty"e com inations

8t-utm9

/agety"e= "rocessing

class *18t-12w9

4m"loyee tax

in!oty"es82&*= 2&0= 2

Taxa le wagety"es8?3xx9

Tax modi!iers8rule +MOT9


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Tax &agetypesDescriptions of tax wagetypes

T(ese wagety"es store t(e results o! tax calculationsE ot(er t(an t(e wagety"es !or em"loyee taxes= t(ey are notreally lin ed to t(e amount o! cas( t(e em"loyee receives.

/agety"e Descri"tion 4x"lanation otes

?3xx Taxa le earnings T(is is t(e amount o! earnings8"ayments9 t(at is taxa le !or eac(aut(ority and tax ty"e. t does notinclude "re tax deductions.

Some tax aut(orities re5uire t(ecom"any to" re"ort t(ese wages.Ot(er t(an t(at= t(ey are not used int(e tax calculation "rocess.

?)xx ,e"orta le wages T(ese amounts are t(e ?3xx earningsminus t(e "re tax deductions. T(eseamounts are sent to :S !or taxation.

States re5uire com"anies to re"ortt(eir ?)1& unem"loyment wages every5uarter.

?*xx Taxa le wages T(ese are t(e amounts t(at are taxed!or eac( aut(ority ; tax ty"e. T(esewages re!lect tax ca"s 8i.e. !or 6 CAand unem"loyment9 and reci"rocity.T(e ?*xx wagety"es are returned toSAP !rom :S .

T(ese amounts are t(e ones re"ortedon t(e / 2.

?7xx Taxes T(ese amounts are !or em"loyee andem"loyer taxes= ased on t(e ?*xxwages= as calculated y :S .

Contains em"loyee "aid andem"loyer "aid taxes 8"rocessing class*2 determines t(is9

? xx Taxa le not taxedwages

Certain wages can e re"orted astaxa le= ut no tax is re5uired to eta en !rom t(em.

m"uted income on grou" term li!einsurance is a good exam"le o! ataxa le not taxed earning.

? xx +ncollected taxes T(ere are cases w(ere an em"loyee(as taxa le income= ut not enoug(

money to "ay !or t(e taxes on it.nstead o! ?7xx taxes= SAP records t(eamount o! uncollected tax in ? xxwagety"es. 8Taxa le wages are notalways cas( wages9.

+ncollected 6 CA and Medicare taxeswill try to alance out in !uture

"ayrolls= and ot(ers do not.

? xx ot reduced wages n some cases t(e system is a le todeduct a "re tax deduction ut doesnot (ave enoug( taxa le income too!!set it. T(e amount o! taxa leincome t(at could not e o!!set 8i.e.reduced9 is stored in t(e ? xxwagety"es.

T(e system will try to reduce wages int(e next "ayroll y t(ese amounts. !an em"loyee (as ? xx wagety"es= t(ent(eir 6 CA?Medicare and ot(er !lat ratetaxes wont tie ac to t(eir ?*xx wages8i.e ?*&3 N ).2@ H ?7&39.

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SAP US Payroll Tax Class"in'ing tax wagetypes to ot#er tax data

4ac( tax wagety"e also (as a s"lit indicator set= and t(is lin s it to t(e tax aut(ority it is re"orta le to. 6or exam"le=we could (ave two or t(ree ?7&1 wagety"es in a "ayroll= and t(e s"lit lin s us to t(e TA> ta le in t(e "ayroll resultt(at tells us t(e tax aut(ority it is re"orta le to. n t(e !ollowing case we see t(at a s"lit o! F&1 lin s us to 6ederal int(e TA> ta le= and s"lit F&2 lin s us to OJ 8t(is is !rom t(e Dis"lay Payroll ,esults tool= or re"ort ,PC'ST,+9

$T ($esults Ta%le)

T(e two digit num er in t(e FC1 column in t(e ,T lin s us to t(e FSS column in t(e TA> ta le. So w(en t(e C1 s"litis &1= we now t(at wagety"e is lin ed to tax aut(ority 64D. /(en C1 is &2= t(en t(e wagety"e is lin ed to taxaut(ority OJ.

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SAP US Payroll Tax ClassT(e TA> ta le also s(ows us t(e data used to calculate taxes in t(at "ayroll result. 6or 6ederal= we see t(at t(is"erson (ad 13 tax exem"tions= !iled Married= and t(is was used !or (is resident and unem"loyment tax calculations.

! t(ey were exem"t !rom any taxes= we would see t(at in t(e FTex indicator line % t(ere would e an exem"tionindicator under eac( FTax ty"e t(at was exem"ted.

TA* Ta%le

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ross to +et &agetypesT(ese wagety"es control t(e amount o! cas( t(e em"loyee receives. T(e various wagety"es used to ma e"ayments and ta e deductions all cumulate= or add into t(ese wagety"es. T(ese gross to net wagety"es t(ere!oremay or may not (ave anyt(ing to do wit( taxa le wages or taxes. T(ey sim"ly ee" trac o! (ow muc( money to"ay t(e em"loyee.

/agety"e Descri"tion 4x"lanation otes

?1&1 Total $ross T(is contains all t(e cas( "ayments toan em"loyee % w(et(er t(ose "aymentsare taxa le or not.

?11& Total 44Deductions

All em"loyee deductions t(at were ta en!rom t(e em"loyee s "ay !or t(e current"ay "eriod.

?-+& Total 44 Taxes All em"loyee taxes ta en !rom t(e "ayt(is "ay "eriod

?-)& et Pay T(e total amount o! net "ay !or t(eem"loyee.

! t(e em"loyee de"osits t(eir"ay into multi"le accounts= t(ent(ere will e a ?--# !or eac(account. T(e sum o! ?--# e5uals?-)&.

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SAP US Payroll Tax Class6or a 1&& no "ay gross u"= we enter t(e net wagety"e and t(en t(e system generates t(e gross and t(e tax"ayment w(en "ayroll runs.

Period 1 in 1

/agety"e Descri"tion Amount otes

?1&1 Total gross )& Since 2*&$ is a cas( "ayment= it is cumulated into ?1&1?-+& Total 44 Tax )& Actual em"loyee tax deducted !rom em"loyee

?-)& et Pay &

2*&4 Tax 45ual et 1&& o "ay net

2*&6 Tax 45ual $ross 1)& o "ay gross % no cumulation to ?1&1

2*&$ Tax 45ual Tax )& Cas( "ayment to cover )& in ex"ected em"loyee tax

Pro%lems wit# ross,ups! t(e em"loyee (as a claim w(en a no "ay gross u" is "rocessed= t(e cas( "ayment !or taxes will !irst go to satis!y

t(e claim= instead o! o!!setting taxes. Claims always come e!ore taxes. n t(e 1&& no "ay gross u" exam"le= wewould t(en (ave 1&& net= 1)& gross= Iero net "ayment= and uncollected taxes.

Period 1 in 1


?1&1 Total gross )&

?-+& Total 44 Tax &

? xx +ncoll 44 tax )& T(e )& in 2*&$ was used to "ay o!! t(e existing claim !irst= sot(ere was no money le!tover to "ay !or taxes. ow t(eem"loyee s taxes are not in alance wit( t(eir wages.

?-)& et Pay &

?-)1 Claim )&

?-)3 Claim "aid )&

2*&4 Tax 45ual et 1&& o "ay net

2*&6 Tax 45ual $ross 1)& o "ay gross

2*&$ Tax 45ual Tax )& Cas( "ayment to cover )& in ex"ected em"loyee tax

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$econciling Taxa%le &ages ! +o $etrocalculationMany times we (ave to reconcile t(e taxa le wages ac to t(e wages "aid to t(e em"loyee. To do t(is= identi!y allt(e taxa le wagety"es in t(e ,T and add t(em toget(er. Taxation may e di!!erent !rom one aut(ority and one taxty"e to anot(er. MOD4' "rogram to determine w(ic( wagety"es are taxa le !or t(evarious tax aut(orities= tax ty"es= and tax modi!iers./(en reconciling t(e wages= e sure to ee" in mind w(ic( ones are taxa le vs. taxa le not taxed. /agety"es t(at

are Ftaxa le will go into ?3xx= ?)xx and ?*xx. Taxa le not taxed wagety"es will cumulate into ? xx. T(e / 2 adds t(e?*xx and ? xx wagety"es toget(er !or re"orting./(en alancing taxes to t(e taxa le wages= also e aware o! any uncollected taxes t(at may e "resent.

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$etrocalculationsCas# vs Tax Perspective

n ot( current "eriod and retro "eriod calculations= t(ere really is no direct lin etween cas( wages and taxa lewages. t is est to t(in o! t(em as two se"arate "rocesses.ross to +et -.uation6or every "ayroll "eriod t(e net "ay can e calculated wit( t(is e5uation

?1&1 ?11& ?-+& R ?--2 R ?-)1 ?-)3 ?-)&

Or in !riendlier terms

Total cas( "ayments % total em"loyee deductions % total em"loyee taxes R retro di!!erences R claim % claims "aid net "ay.

/orming $etro Differences+sing t(e gross to net e5uation as a guide= an a reviated "ayroll result could loo li e t(e ta le elow. One

exce"tion is t(at we don t "ut accounts on ?1&1= ?11& and ?-+& % instead we account !or t(eir individual com"onentssuc( as ase "ay= overtime= ca!eteria deduction= wit((olding tax and so on.

Period 1

/agety"e Amount De it Credit

?1&1 1&&& 1&&&

?11& 2&& 3&&

?-+& 3&& 3&&

?-)& -&& -&&

/agety"e amounts can c(ange retroactively. 6or exam"le= i! an em"loyee was under"aid y 0 (ours o! overtime ina "revious "eriod= t(e amount o! t(e overtime wagety"e would increase retroactively. Since overtime is a cas("ayment= it would cause ?1&1 to increase retroactively= s(owing t(at we now need to "ay t(e em"loyee 1&& morein t(is case. :ut= in a retrocalculated "eriod we can not c(ange t(e amount o! net "ay= since t(at "ay was alreadytrans!erred to t(e an 8or "aid via c(ec 9. T(e di!!erence etween w(at was "aid originally vs w(at s(ould now e"aid is "ut into a wagety"e called Fretro di!!erences = or ?--1. T(is ee"s t(e retro "ayroll "eriod in alance 8i.e.de its e5ual credits9.

Period 1 in 2


?1&1 01122 01122

?11& 2&& 2&&

?-+& 3&& 3&&

?-)& -&& -&&

?--1 1&& 0122

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SAP US Payroll Tax Class?-)& & &

?--2 1&&& 1&&&

?-)1 1&&& 1&&&

T(e claim 8?-)19 is t(e amount t(e em"loyee owes t(e com"any. n every su se5uent "ayroll t(e system will a""lymoney towards "aying o!! t(e claim= e!ore it uses t(e money !or any deductions or taxes. 6or exam"le= in "eriod 3t(e em"loyee gets "aid )&&= and all o! t(at gets allocated to reduce t(e claim.

Period 3 in 3


?1&1 )&& )&&

?11& & &

?-+& & &

?-)& & &

?-)1 7&& 7&&

?-)3 1&&& 1&&&

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SAP US Payroll Tax Class$etroactive c#anges to gross,ups

Client >>> use o! no "ay gross u"s "resents "ro lems !or t(e +TP, !unction in retro calculations. 6or exam"le= i!a no "ay gross u" retroactively increases= and t(e em"loyee (as no ot(er cas( money 8i.e. 3121' ex"ats9 t(en it sli ely you will get uncollected taxes t(e gross goes u" retroactively since gross u"s are tax w(en earned= and t(ecas( "ayment !or taxes increases to cover t(e additional amount o! tax. Jowever= t(e +TP, !unction com"arestotal tax to t(e original total gross and !inds t(at t(e amount o! tax now exceeds t(e amount o! total gross= and itreduces t(e em"loyee taxes 8creating uncollected tax9. Jowever= t(e amount o! t(e cas( "ayment to cover taxes

does not go down= and t(e di!!erence etween t(at and total tax results in a net "ayment to t(e em"loyee. 6orexam"le

Period 1 in 1


?1&1 Total gross 1&&&

?-+& Total 44 Tax 1&&&

?-)& et Pay &

2*&4 Tax 45ual et 2&&&& o "ay net

2*&6 Tax 45ual $ross 21&&& o "ay gross

2*&$ Tax 45ual Tax 1&&& Cas( "ayment to cover 1&&& in em"loyeetax

T(en in "eriod 2 we retroactively increase 2*&4 to 3&&&&

Period 1 in 2


?1&1 Total gross 1-&&?-+& Total 44 Tax 1&&& Ca""ed at 1&&&E t(e value o! ?1&1 in t(e

original "eriod

? xx +ncoll Tax -&& T(e amount o! taxes it could not ta e

?--1 ,etro di!!erences -&& ?1&1 ?11& ?-+& R ?--1 (as to e5ual ?-)&=so ?--1 is set to alance t(is e5uation

?-)& et Pay &


2*&6 Tax 45ual $ross 31-&& o "ay gross

2*&$ Tax 45ual Tax 1-&& Cas( "ayment to cover 1-&& in ex"ectedem"loyee tax

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SAP US Payroll Tax Class And assuming t(e em"loyee (ad no ot(er transaction in "eriod 2= (e gets "aid -&&

Period 2 in 2


?1&1 Total gross &

?-+& Total 44 Tax &

?--2 ,etro di!!erences -&& T(e sum o! ?--1 times 1

?-)& et Pay -&& ?1&1 ?11& ?-+& R ?--2 net "ay

To minimiIe t(e "ro lems wit( retroactive c(anges to gross u"s a!!ecting net "ay or creating claims= we wrote anew "ayroll !unction 8 ,$+69 t(at Ftric s t(e system so t(at i! gross u"s c(ange retroactively it always (as enoug(money to cover taxes= so no retro di!!erences are created. T(e exam"le listed a ove s(ould not (a""en in Client>>> system ecause o! t(is en(ancement.

Crossing 5ears/(en a "ayroll retro crosses !rom t(e current year into a "revious year t(en s"ecial "rocessing ta es "lace !ortaxes. SAP will not allow taxes in t(e "revious year to c(ange !rom t(eir original values. 6or exam"le= i! you"rocess a Kanuary correction c(ec t(at retro s ac into t(e "revious year and somet(ing causes taxes to c(ange=SAP will reset t(ose tax amounts ac to t(eir original value. T(is is done y t(e "ayroll !unction +OT>& % ee" oldtaxes in retro. T(is exce"tion to t(is !unction is t(at it does let you c(ange tax amounts via AMC s 8in!oty"e 2219.

n t(is exam"le= we ll s(ow w(at (a""ens w(en a no "ay gross u" c(anges retroactively in t(e "revious year. n t(eoriginal "eriod 12 a no "ay gross u" o! 3&=&&& was "rocessed

Period 12 in 12


?1&1 Total gross 1-&&

?-+& Total 44 Tax 1-&&

?-)& et Pay &


2*&6 Tax 45ual $ross 31-&& o "ay gross

2*&$ Tax 45ual Tax 1-&& Cas( "ayment to cover 1-&& in ex"ected

em"loyee tax

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SAP US Payroll Tax Class&,6 Corrections (&,6C)

Once / 2 s are run and !inaliIed= any c(ange to taxa le wages or taxes in t(e "revious year will cause a / 2C 8/2 correction9 !orm to e "roduced. T(e F!inaliIed date !or / 2 s is stored in t(e system= and can e viewed via t(eTax ,e"orter 8P+1#9 menu "at( Tools H Set !iling date 8a!ter selecting t(e tax com"any and tax !orm / 29.

SAP US Payroll Tax Class

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