In some areas, multiple local payroll taxes are imposed based upon the location of the work being performed in combination with the employee’s place of residence. Managing the withholding for these types of multiple taxing jurisdictions can be a complicated task.
If the local governments in your area require this type of withholding and your payroll service or external payroll software cannot handle this task (note that QuickBooks is unable to calculate multiple taxes in this manner), then SuccessWare®21 may be able to help.
Activating
Multiple Local Tax Code Processing
Setting up
Local Payroll Tax Codes
Identifying
Local Payroll Tax Codes for Cities/Zip codes
Reporting
Local Tax Withholding
Reconciling
the Local Tax Withheld
To use this feature of SuccessWare21®, you will need to:
1) Turn on ‘Assisted calculation of multiple local payroll tax withholding’,
2) Setup local payroll tax codes in the Payroll Tax Code reference book,
3) Be sure to assign one of these payroll tax codes to each city/zip combination in the Cities reference book.
4) Setup each employee with an ‘Employer Payroll Tax’ code.
By selecting the ‘Assisted calculation of multiple local payroll tax withholding’ on the Miscellaneous page in Payroll Setup, you are telling SuccessWare®21 to check and make sure all payroll entries (timecard and miscellaneous wages) have a local tax code assigned before you post the associated payroll period. When this feature is active:
· you will be able to produce Local Payroll Tax Withholding Reports,
· you will be prompted when preparing employees, if all payroll tax coding is not complete for the period/employee,
· you will be prevented from posting the payroll period until all the payroll tax coding is complete for the period.
NOTE: From the ‘miscellaneous’ page of Payroll Setup, you can access the reference books required for this feature (‘Payroll Tax Codes’, ‘Cities’, and Zip codes).
Local payroll tax codes can be set up in the reference library to define the jurisdictions for which you wish to withhold taxes. Open the ‘Local Payroll Tax Codes’ book from payroll setup or in the payroll section of the reference library, and add your local tax codes:
Code—a six character alphanumeric code that uniquely identifies the taxing jurisdiction you are defining.
Description—a brief description of the taxing jurisdiction.
Percent—the percentage of the employee’s gross wages to be withheld.
ResBal—put an ‘X’ in this column if you want to withhold the difference between the location of service withholding and the location of residence withholding. For example: an employee performs work in a jurisdiction ‘T1’ where the percentage is 1.5%. This employee resides in a jurisdiction ‘T5’ where the percentage of withholding is 2.0%. 1.5% of the wages earned for this service will be reported as withholding for the jurisdiction ‘T1’. If the ResBal column is checked for the ‘T5’ jurisdiction, then the balance of 0.5% (2.0-1.5) will be reported as withholding for the jurisdiction ‘T5’.
NOTE: Along with the jurisdictions that require withholding, if there are cities/zips in your area that do not require withholding you will need to set up a code that has a percentage of 0%. When using this feature, it is important that all cities/zips are set up with a tax code, even if they do not require withholding.
You must associate these local payroll tax codes with cities and zip codes in either the city reference book or the zip code reference book. When an employee does work for a job in one of the cities/zips, the withholding amount will be reported for the corresponding Local Payroll Tax Code.
When using this feature, it is important that all cities/zips are set up with a tax code, even if they do not require withholding.
You must setup each employee with an ‘Employer Payroll Tax’ code. This will be the code assigned to non-job related timecard and miscellaneous wages (i.e., shop time, available-on-the-clock, lunch etc…).
The withholding of taxes (federal, state, and local) must all take place within your external payroll service, or software (e.g., QuickBooks). SuccessWare®21 can report on withholding amounts for multiple local taxing jurisdictions. These figures can then be supplied to your payroll service, or manually entered as a deduction/withholding in your payroll software.
When payroll periods are prepared, the period, timecard entries, and miscellaneous wages are associated with the appropriate payroll tax code as set up at the time of preparation. This information is then used to generate reports. The local payroll tax code will be assigned to entries as follows:
· Job related entries will use the tax code associated with the city/zip of the service location
· Non-job related entries will use the tax code setup on the employee’s setup: “Employer Tax Code”
· Residence Balance withholding will be based on the tax code associated with the city/zip of the employees residence in employee setup: “Address”.
To obtain a report that identifies each employee’s total local tax withholding for a payroll period:
1) From the payroll manager, select the period in question
2) Select the report option ‘Wage Source Report’.
3) Select the report option ‘Local Tax Withholding’.
4) Select either the ‘print’ or ‘preview’ buttons at the bottom of the window.
The resulting report will list for each employee the total withholding for all local taxing jurisdictions for the associated payroll period. These figures can be supplied to your payroll service, or manually entered as a deduction/withholding in your payroll software.
The following describes some of the options available for this report:
· Analysis Type—
o Earnings Analysis: This option will analyze timecard entries and miscellaneous wages and summarize total hours and gross wages grouped by pay item, premium code and rate. As an option, you can also chose to summarize these figures by department as well.
o Local Tax Withholding Analysis: This option will analyze timecard entries and miscellaneous wages and summarize the total local tax withheld by
· Detail Type—
o No detail: Individual timecard entries and miscellaneous wages will not be listed.
o Time breakdown detail: The breakdown of regular, overtime, premium, non-regular and non-paid time for each timecard entry and miscellaneous wage will be listed.
o Job location detail: Job location name and address information will be listed for each timecard entry and miscellaneous wage will be listed.
o Withholding detail: The local tax code, percent of withholding, amount withheld, balance percentage to be withheld for the residential taxing jurisdiction, and the amount withheld for the residential taxing jurisdiction.
o Period/Date Range—This option controls which timecard entries and miscellaneous wages to report on. Only entries prepared into the periods selected will be included in the report and summary information.
· Employee Options—You can select to report on all timecard entries and all miscellaneous wages for all employees or just on employee. There is also an option to start a new page for each employee.
No special steps are required when reconciling payroll periods to reconcile the local tax liabilities. This liability will reconcile into one single expense/addition in the same fashion as other tax withholding liabilities.
The ‘Wage Source Report’ can be used to determine the breakdown of that liability to the individual taxing jurisdictions.