Taxes and Deductions

The Taxes and Deductions feature allows you to define specific calculations, or formulas, and apply them to employee pay stubs. However, this feature encompasses more than taxes or deductions. It includes many other aspects of employee pay stubs, such as earnings, employer deductions, and accruals. By default, Taxes and Deductions apply to every pay period. If necessary, you can assign them to individual employees. In addition, they can be ignored if the eligibility criteria are not met, or if the calculation formula results in a zero value.

The taxes and deductions that you configure here will apply to your employees, and will appear in the Tax tab for each employee in the Employees listing (Employee -> Employees). Before you configure a tax or deduction item, you should review the definitions and examples of the different calculation types.

To add a new Taxes & Deductions type:

• Click Payroll, then click Taxes & Deductions in the main menu.
• Click New in the button bar. An inset page will appear which contains several tabs: Tax / Deductions, Eligibility, and Employee Settings.
• Complete the fields in all tabs.

• Click Save in the button bar to save your changes, or click Cancel to discard.

See the Basic Operation section for details on viewing, adding, editing and deleting.

Tax / Deductions Tab FIELD DESCRIPTION Status Select a status from the drop-down. STATUS DESCRIPTION Enabled This tax or deduction is active. Disabled This tax or deduction is inactive. Type Select a type for this item. TYPE DESCRIPTION Tax This item is a tax. Deduction This item is a deduction. Other This is a miscellaneous item not classified as either a tax or deduction. Name Enter a descriptive name for the item. Calculation Choose a calculation formula for this item. There are many choices; see the definitions and examples for an explanation of each type of calculation. CALCULATIONS DESCRIPTION Percent Enter a simple percentage, such as 1.00% or 5.00%. Advanced Percent This is an advanced calculation with two additional criteria: Annual Wage Base/Maximum Earnings and Annual Deduction Amount. ADVANCED PERCENT DESCRIPTION Percent Enter a simple percentage. Annual Wage Base/Maximum Earnings This is the maximum annual limit to which the percentage will apply. For example, setting this value to $40,000 will cause this calculation to disable after the employee has earned this amount during the year. Annual Deduction Amount This is the annual amount that deducts from the calculation. For example, if you set this value to $5,000, this calculation will not apply to the first $5,000 of the employee’s earnings. Advanced Percent (w/Target) This is a advanced calculation with two additional criteria: Target Amount Limit and Target YTD Limit/Balance. The calculation applies up to the Target Amount Limit on a single pay stub and the Target year to date (YTD) Limit of the Pay Stub Account. For example, you could use this formula to calculate a 401K contribution of 10% of the employee's wages to a limit of $300 per pay stub and an annual contribution limit of $18,000. ADVANCED PERCENT (W/TARGET) DESCRIPTION Percent Enter a simple percentage of the Include and Exclude Pay Stub Accounts. Target Amount Limit This is the amount limit on a single pay stub for the selected pay stub account . Target YTD Limit/Balance This is the year to date (YTD) target limit or balance amount for the selected pay stub account. Advanced Percent (Range Bracket) This advanced percentage calculation requires four additional criteria: Annual Deduction Amount, Annual Amount Greater Than, Annual Amount Less Than, and Annual Fixed Amount. The calculation only applies when the annual amount is higher than the value given in Annual Amount Greater Than and lower than the Annual Amount Less Than value. You may employ multiple Advanced Percent (Range Bracket) deductions together to calculate amounts for one or more brackets. ADVANCED PERCENT (RANGE BRACKET) DESCRIPTION Percent Enter a simple percentage. Annual Deduction Amount Enter the amount of the deduction. Annual Amount Greater Than Enter the lowest amount for the range. Annual Amount Less Than Enter the highest amount for the range. Annual Fixed Amount Enter a fixed amount for this deduction. For example: Greater Than Less Than Percent $5,000 $10,000 1% $10,000 $20,000 2% $20,000 $30,000 3% Advanced Percent (Tax Bracket) This is another advanced percentage calculation similar to the Advanced Percent (Range Bracket) calculation. The difference is that this calculation is done when the value for Deduction Amount exceeds the value for Annual Exempt Amount. You can use multiple Advanced Percent (Tax Bracket) deductions to act as a complete tax formula. This calculation causes TimeTrex to forgo calculation if the estimate is that the employee will earn less than $1,000 for the entire year. If the employee actually earns more, then a calculation of 8% will apply against any amounts between $1,000-9,999, 8.5% on any amounts between $10,000-19,999, and 9.0% on any amounts over $20,000. ADVANCED PERCENT (TAX BRACKET) DESCRIPTION Percent Enter a simple percentage. Annual Wage Base/Maximum Earnings Enter the base wage or maximum annual earnings. Annual Deduction Amount Enter the deduction amount. Annual Exempt Amount Enter the amount that is exempt. For example: Name Exempt Amount Wage Base Amount Percent Bracket 1 $1,000 $9,999 8.0% Bracket 2 $10,000 $19,999 8.5% Bracket 3 $20,000 $0 9.0% Advanced Percent (Tax Bracket Alt.) This is another advanced tax bracket calculation. The calculation only applies when the annual amount is less than the Annual Deduction Amount, higher than the Annual Amount Greater Than value, and lower then the Annual Amount Less Than value. After the calculation, the value for Annual Fixed Amount is added to the end result. This calculation is different from the Advanced Percent (Tax Bracket) because only a single bracket in a group may apply to an employee. Each individual bracket is designed to be the entire tax formula and function on its own. The final result is the same as an Advanced Percent (Tax Bracket), but it is just a different way to get there. ADVANCED PERCENT (TAX BRACKET ALT.) DESCRIPTION Percent Enter a simple percentage. Annual Deduction Amount Enter the amount of the annual deduction. Annual Amount Greater Than Enter the lowest amount for the range. Annual Amount Less Than Enter the highest amount for the range. Annual Fixed Amount Enter the annual fixed amount. For example: Name Greater Than Less Than Percent Fixed Amount Bracket 1 $0 $10,000 5.0% $0 Bracket 2 $10,001 $20,000 10.0% $500 Bracket 3 $20,001 $999,999 15.0% $1500 In this example, TimeTrex will calculate 5% if the employee earned between $0 and $10,000. If the employee earns more than this, there will be no calculation for the first bracket and TimeTrex moves on to the next bracket. If the employee earns between $10,001 and $20,000, then 10% would be calculated on the amount earned between 10,000 and $20,000 with the Fixed Amount being added at the end. Only a single bracket is ever applied because the fixed amount is always the total tax amount that would be calculated from all previous brackets. Fixed Amount Enter an amount that is fixed. Fixed Amount (Range Bracket) This fixed-amount calculation has multiple criteria: Amount, Annual Deduction Amount, Annual Amount Greater Than, and Annual Amount Less Than. The fixed amount only applies when the Amount minus the Annual Deduction Amount is higher than the value of Annual Amount Greater Than and lower than the Annual Amount Less Than value. FIXED AMOUNT (RANGE BRACKET) DESCRIPTION Amount Enter a fixed amount. Annual Deduction Amount Enter the annual fixed amount. Annual Amount Greater Than Enter the lowest amount for the range. Annual Amount Less Than Enter the highest amount for the range. Fixed Amount (w/Target) This fixed-amount calculation only applies when the amount of the Included/Excluded Pay Stub Accounts is less than the amount of the Target YTD Limit/Balance. When specifying Include or Exclude Pay Stub Accounts, the Pay Stub Account Value should be set to 'YTD Amount'. This calculation is useful for automatic processing of loans. For example, you can deduct $100 from an employee's pay stub until the Loan Accrual value reaches $0. Another example would be for uniform reimbursements where you reimburse each employee $10 on each pay stub until they have been paid a total of $100. FIXED AMOUNT (W/TARGET) DESCRIPTION Amount Enter a fixed amount. Target YTD Limit/Balance Enter the year to date target limit or balance amount. Custom Formula You can customize a calculation formula if the none of the other pre-defined calculations fit your requirements. US-Medicare Formula (Employee) Use for the employee's Medicare deduction. FILING STATUS DESCRIPTION Single or Head of Household Employee is single or head of a household. Married w/o Spouse Employee is married and filing without spouse Married w Spouse Employee is married and filing with spouse. US-Medicare Formula(Employer) Use for the employer's Medicare deduction. US-Social Security Formula(Employee) Use for the employee's Social Security deduction. US-Social Security Formula(Employer) Use for the employer's Social Security deduction. US-Federal Unemployment Insurance (Employer) Use for employer's Federal Unemployment Insurance deduction. Canada-CPP Formula Use to calculate CPP (Pension) in Canada. Canada-CPP2 Formula Use to calculate additional CPP2 (Pension) in Canada. Effective January 1, 2024 Canada-EI Formula Use to calculate EI (Employment Insurance) in Canada. Federal Income Tax Formula This is a formula based on the specific country that you choose. Depending on the country, there may be additional fields (such as Marital Status or Allowances) that require input. The values set here are used as defaults. However, you can configure these fields separately for each employee. The settings such as filing status or claim amounts can be set separately for each employee by going to Wages. FEDERAL INCOME TAX FORMULA DESCRIPTION Country Select the country for the tax. Province/State Income Tax Formula This is the formula based on the specific province or state that you choose. Depending on the choice of province or state there may be additional fields (such as filing status or allowances) that require input. PROVINCE/STATE INCOME TAX FORMULA DESCRIPTION Country Select the country for the tax. Province/State Select the province or state. US-State Unemployment Insurance (Employer) Use for employer's State Unemployment Insurance deduction. Local (City/District/County) Income Tax Formula This is a formula that depends on the specific city, district or county that you choose. Depending on the choice, there may be additional fields that require input. LOCAL (CITY/DISTRICT/COUNTY) INCOME TAX FORMULA DESCRIPTION District/County Name Enter the name as required by the tax authority. Where applicable, use the following format to specify codes and region types: [<CODE><REGION>] <NAME> For example, for Ohio, it might be the following (without quotes): "[023R] Aberdeen" when an employee resides in Aberdeen. "[023C] Aberdeen" when an employee works in Aberdeen. For Indiana, it might be: "[92] White" when the employee resides in White County. District/County Rate Enter the tax rate. Formula Type Only available if the selected Calculation is Federal, Province/State, or Local Income Tax Formula. FORMULA TYPE DESCRIPTION Based on Payroll Run Type Formula type is automatically chosen based on the Payroll Run Type that is being processed. Always Regular (Non-Averaging) Always uses the Regular (Non-Averaging) formula type, regardless of the Payroll Run Type that is being processed. This is the formula primarily used by most governments, however it can be inaccurate if employee wages fluctuate significantly throughout the year, such as for part-time employees or employees who receive commissions or bonuses. Always Special (Cumulative Averaging) Always uses the Special (Cumulative Averaging) formula type, regardless of the Payroll Run Type that is being processed. This is a special formula that uses a cumulative averaging process to try to more accurately determine the employees wage for calculating income tax. This formula is often much more accurate if employee wages fluctuate significantly throughout the year. Due to its higher accuracy, by default this formula is automatically chosen when processing an Out-Of-Cycle payroll run. Pay Stub Account The Pay Stub Account (line item) that the resulting calculation will appear as on employees pay stubs. Calculation Order Defines the order that calculations should be performed only in extremely rare cases where a circular dependency may occur. In most cases you can use the default value, or any value that is not already used by another Tax/Deduction. Include Pay Stub Accounts Select the pay stub accounts to be used as input values to the selected calculation. This is required for any calculation that is not a fixed amount. For example with a percentage calculation the defined percent is calculated on the Included Pay Stub Accounts minus any Excluded Pay Stub Accounts. INCLUDE ACCOUNTS DESCRIPTION Pay Stub Account Value Select a value to include (ie: Amount, Units/Hours, YTD Amount, YTD Unit/Hours). Selection Select the item and move it to the right column. Exclude Pay Stub Accounts Select the pay stub accounts to exclude from the calculation. This is normally only used when the Include Pay Stub Accounts defined above are Total accounts. For example, you could include the Total Gross account then exclude the Expense Reimbursement account. EXCLUDE ACCOUNTS DESCRIPTION Pay Stub Account Value Select a value to exclude (ie: Amount, Units/Hours, YTD Amount, YTD Unit/Hours). Selection Select the item and move it to the right column. Employees Select the employees that this calculation will be applied to and move them to the right column.

Eligibility Tab FIELD DESCRIPTION Apply Frequency How often this Tax/Deduction calculation is applied. Selecting Hire Date or Termination Date means that it will only apply once if the employees hire date or termination date falls within the pay period. Payroll Run Type Defines which Payroll Run Types this applies to. Start Date Select a start date from the calendar, or leave it blank. End Date Select an end date from the calendar. If you leave the field blank, it will continue indefinitely. Start/End Dates Based On Select which date the above specified Start Date and End Date criteria are based on. For e.g. If Pay Stub Transaction Date is selected then the Tax/Deduction will be eligible if the pay stub transaction date falls between the Start Date and End Date selected. Minimum Length of Service Enter the minimum length of employee service for this tax or deduction. This uses a 'greater than or equal to' (>=) comparison. See example in Maximum Length of Service. MIN. SERVICE DESCRIPTION Number Enter an amount to represent the Minimum Length of Service. Time Unit Select the unit of time (e.g. years, days, etc.). Maximum Length of Service Enter the maximum length of employee service for this tax or deduction. This uses a 'less than' (<) comparison. Example using Minimum and Maximum Length of Service : Milestone 1: >= 0 years and < 4 and Milestone 2: >= 4 years and < 8 years. MAX. SERVICE DESCRIPTION Number Enter an amount to represent the Maximum Length of Service. Time Unit Select the unit of time (ie: years, days, etc.). Minimum Employee Age Enter the minimum employee age (ie: 18 years). Maximum Employee Age Enter the Maximum employee age (ie: 70 years).

Employee Settings Tab FIELD DESCRIPTION Filing Status Use this field to indicate the employee's marital status. FILING STATUS DESCRIPTION Single Select this value if the employee is single. Married Select this value if the employee is married.