Tax Codes Table

Tax Code for FIT (Example)

Fields on the Tax Codes Table

Code. Enter a Code, of ten characters or less with no spaces or special characters.
Description. Every Tax Code should have a description.
Active? An active code has the Active checkbox selected, making the code available and keeping the code in effect as a valid choice. An active Tax code has the Active checkbox selected, populated with a checkmark.

Determine if this tax code should be active in the system or should be deactivated. To activate/deactivate the indicator, click on the Edit icon to put the record in add/edit mode, and then click on the Active indicator’s checkbox.

Verify the rest of the record if the code is Active.

Annualize Adjust? To allow annualize-adjust processing to occur for this tax, select the Annualize Adjust indicator. It is recommended that all tax records that process wages times a defined percentage have Annualize Adjust (i.e. SUI tax records) selected, unless the rate can change mid-year. Annualize-adjust will increase or decrease tax amounts during payroll processing according to the employee's year-to-date taxes processed and the current tax rate.
Tax Category Code. A Tax Category Code may be included on a tax code for reporting purposes. Organizations may select a Tax Category Code to assign the Tax Code to a group for reporting purposes or to associate the tax code with an accumulator. (The Payroll Category Codes provide the selection list for the Tax Category Code field.)
Process Sequence. Processing sequence determines the order in which funds are subtracted from the available wages within a group of like taxes. Verify the Process Sequence to define the order in which (within the group of tax codes) this code is processed when run in a payroll.

Processing Information

State Code. Processing Information includes the State Code, if applicable, the Tax Locality Code (for Local Taxes if applicable).
Tax Reciprocation. For a reciprocal tax, select the Tax Reciprocation code from the selection list. See Tax Reciprocation.
Wage Limit. Verify the taxable Wage Limit to determine processing of current tax. The system checks this field to calculate if the current wages are under/over the limit. If under the limit, system processes the taxes. If over the limit, the system subtracts the limit and processes taxes on the remainder.
Exemption Value. Enter any Exemption Value. For income taxes, based on the number of exemptions taken, verify the Exemption Value (the current value given for each exemption as provided on the IRS tax worksheet).
Supplement Rate. Verify the Supplement Rate (the adjusted tax rate designated for this category of tax when taken from a supplemental earning).
Tax Amount or Percentage. For certain taxes, a Tax Amount or Percentage may be entered. Verify these entries, if any apply. For instance, to enter 1.25%, you would enter a Tax Percentage of 1.25 without the percentage sign.
Use Rate Table? If a Rate Table applies to this Tax Code, verify that the Use Rate Table checkbox is selected. Selecting the Use Rate Table checkbox on the Tax Codes Table will cause the affected Tax Code to process according to the parameters set on the Code’s Tax Rate Table. If a specific Tax Code has a Rate Table, the specific Tax Code must have the Tax Code selected on it.
Rates button. The Rates button on the Tax Codes Table opens the Tax Rate Table in a secondary window.
Process Payroll 1 – 5 ? Verify that all the boxes for all payrolls of the month that this tax code is to be processed for are selected. A Tax Code can be processed for all payrolls within a month or for specific payrolls within the month: Process Payrolls 1 – 5.
Payroll Accumulator code. Payroll Accumulators can be defined for taxable wages in the Taxable Wage Accum Code field in regards to this Tax Code. Verify that the correct Taxable Wage Accum Code is selected, if applicable.

Note: The Employee Taxable Wage dollars for employee tax records serve as the "true" total taxable wage amounts for reporting purposes, and the taxable wages continue to accumulate after any wage limits are met that are defined for the Tax Code on the Tax Codes Table.

Other Indicators

The Taxing Authority option should be selected as applicable to the Tax Code.

FIT? FIT is for Federal Income Tax collection.
FICA (EE)? FICA is foremployee contributions to Social Security.
FICA (ER). FICA (ER) is for employer contribution to Social Security.
FHI (EE). FHI (EE) is for employee contribution to Medicare (FHI).
FHI (ER). FHI (ER) is for employer contribution to Medicare (FHI).
FUTA? FUTA is for Federal Unemployment Tax contributions.
SIT? SIT is for state income taxes are collected in some states. Check this indicator if this tax code defines processing to collect state taxes. Note: Many states have special Tax Filing Codes.
SDIS/WC SDIS/WC (EE) (EE)? is for employee contribution to State Disability Insurance OR Workers Compensation.
SDIS/WC (ER)? SDIS/WC (ER) is for employer contribution to State Disability Insurance or Workers' Compensation.
SUI SUI (EE) (EE)? is for employee contribution to State Unemployment Insurance.
SUI (ER)? SUI (ER) is for employer contribution to State Unemployment Insurance.
Local? Some localities collect local taxes. If this tax code defines processing to collect a local tax, verify that the LOCAL indicator is selected.
Tax Component 1. Tax reporting component 1 of taxes reported.

For Indiana county taxes, the "Tax Component 1" value is the two digit county code assigned by the state of Indiana to the county.

Tax Component 2. Tax reporting component 2 of taxes reported.
Tax Component 3. Tax reporting component 3 of taxes reported.

Select the option for the "account" for this taxation to define whether the tax is employee- or employer-paid.

Employee Account. Select Employee Account to indicate this tax is an employee-paid tax.
Employer Account. Select Employer Account to indicate this tax is an employer-paid tax.

Select resident and/or nonresident taxation.

Non-Resident Tax? For the work tax select the Non-Resident Tax checkbox, but not the Resident Tax checkbox. A tax should be marked non-resident that is referenced to the employee Work Tax State on the Compensation tab or State Code on the time entry record. For local taxes, the Work Tax Locality on the Compensation tab or Locality Code on the time entry record will also be referenced.
Resident Tax? For the resident tax, select the Resident Tax checkbox. A tax should be marked resident that is referenced to the employee Resident Tax State recorded on the Compensation tab. For local taxes, the Resident Tax Locality on the Master tab will also be referenced.
Both Non-Resident Tax and Non-Resident Tax checkboxes? For a tax that is both resident and non-resident, select both the Resident Tax and Non-Resident Tax checkboxes. Don't select both for a tax that is either resident or non-resident.

Select other indicators as appropriate.

Print on Check? If the Tax Code should be Printed on the payroll check, verify that this checkbox is selected.
Auto-Create Tax? To notify the payroll engine that the tax record should be created during payroll processing if it does not currently exist for the employee (Federal, state, and local), select the Auto-Create Tax checkbox.
Component of Tax? (Checkbox to include taxable wages for tax reporting). This is for supplemental tax records that are components of a state tax such as the training component of an SUI tax. This enables you to break out all components of a tax without the concern of the taxable wages being duplicated for tax filing.
Taxing Exempt? If the company is considered Taxing Exempt for this tax, verify that the Taxing Exempt checkbox is selected.
Supplemental Payroll? If this tax is to be applied to Supplemental Payrolls, verify that the Supplemental Payroll checkbox is selected.