Description of Issue
My federal income tax calculation is off when I add in my supplemental pay code.
Context
- Munis
- Payroll Processing
Cause
Supplemental pay is taxed at the supplemental rate while the other pays are taxed using the tax table.
Resolution
Determine the percentage of pay that is taxed using the tax table:
- Access Earnings and Deductions: Payroll > Payroll Processing > Payroll Start and Status > Earnings and Deductions
- Search for the employee and click on the Earnings tab
- Double-click the first pay code sum together all pays with a Tax Method of Tax Table
- Take the sum of the tax table pays, take this value and divide in by the total gross pay, note the value
Determine the percentage of pay that is taxed at the supplemental rate:
- Access Earnings and Deductions: Payroll > Payroll Processing > Payroll Start and Status > Earnings and Deductions
- Search for the employee and click on the Earnings tab
- Double-click the first pay code sum together all pays with a Tax Method of Supplemental Rate
- Take the sum of the tax table pays, take this value and divide in by the total gross pay, note the value
In Earnings and Deductions click on the Withholding tab
- Double-click on the federal income tax deduction
- Multiply the deduction gross by both the tax table and supplemental rate values from the previous steps
- Deduction gross * tax table value = amount of FIT gross taxed using the tax table, apply this total to the tax table record
- Deduction gross * supplemental rate value = amount of FIT gross taxed at the supplemental rate, multiply by this rate by the supplemental rate on the employee's tax table
- Add the two values from steps 3 and 4 to determine the final withholding amount
Additional Information
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