What dates does the pay calculation look at for tax purposes?
Ans: Federal, State, and Local Tax records are selected based on the Effective Date of the Tax record in relation to the Paycheck Issue Date, NOT the Pay Period End Date. For example, assume a Pay Run with a Pay Period End Date of 12/31/98 and a Paycheck Issue Date of 01/06/99. PeopleSoft Payroll will use the Issue Date to determine which tax record will be used; in this example 01/06/99 will be used. This means that the 1999 rates (which are delivered with an effective date of 01/01/99) would be applied.
How does PeopleSoft calculate taxes when an employee transfers, after the pay end date and before the check date?
Ans: The paysheet will be created with PA as the work location, because this is where the employee worked for the time frame of 12/1/00 through 12/15/00.
The paycheck shows the following:
UI will be taken in the new location. In this case it will be OH. If you check the EE tax records, you will see that the UI record is on for OH as of 12/19/2000. Withholding - The employee should be taxed in both states because the reciprocity rule for Ohio residents is "tax in both work and resident state". Ohio will be the resident state. He did live and work in PA and then transferred so that as of the check date he lives and works in Ohio. The residency for this check's tax calculations is based on where he lives on the check date, so Ohio would be right. But he performed the work in PA earlier in the pay period, so a work tax is calculated.
In reviewing this scenrio, the bottom line is that the system now does some "fancy dancing." It looks at the old state as the Work State and the new state as the live state, and calculates taxes based on reciprocity rules between those two states. Of course, if you don't want this "fancy" calculation, then it's back to the same old issue of procedure and timing, and having HR or whomever, wait to enter transfer info UNTIL PAYROLL HAS BEEN CONFIRMED. Then they can go in and enter "backdated" transfer info and new tax locations to their hearts content!
Ans: Federal, State, and Local Tax records are selected based on the Effective Date of the Tax record in relation to the Paycheck Issue Date, NOT the Pay Period End Date. For example, assume a Pay Run with a Pay Period End Date of 12/31/98 and a Paycheck Issue Date of 01/06/99. PeopleSoft Payroll will use the Issue Date to determine which tax record will be used; in this example 01/06/99 will be used. This means that the 1999 rates (which are delivered with an effective date of 01/01/99) would be applied.
How does PeopleSoft calculate taxes when an employee transfers, after the pay end date and before the check date?
Ans: The paysheet will be created with PA as the work location, because this is where the employee worked for the time frame of 12/1/00 through 12/15/00.
The paycheck shows the following:
UI will be taken in the new location. In this case it will be OH. If you check the EE tax records, you will see that the UI record is on for OH as of 12/19/2000. Withholding - The employee should be taxed in both states because the reciprocity rule for Ohio residents is "tax in both work and resident state". Ohio will be the resident state. He did live and work in PA and then transferred so that as of the check date he lives and works in Ohio. The residency for this check's tax calculations is based on where he lives on the check date, so Ohio would be right. But he performed the work in PA earlier in the pay period, so a work tax is calculated.
In reviewing this scenrio, the bottom line is that the system now does some "fancy dancing." It looks at the old state as the Work State and the new state as the live state, and calculates taxes based on reciprocity rules between those two states. Of course, if you don't want this "fancy" calculation, then it's back to the same old issue of procedure and timing, and having HR or whomever, wait to enter transfer info UNTIL PAYROLL HAS BEEN CONFIRMED. Then they can go in and enter "backdated" transfer info and new tax locations to their hearts content!
