No Tax Deducted from Employee Checklist
GOAL: To provide a wholistic overview of all the different things that you can spot check to verify any scenario where you are seeing abnormally low, or no tax being deducted from an Employee.
Checklist:
- Verify Tax Tables
- PAYROLL > BOARD > FEDERAL TAX DATA
- Verify Position & Assignmentsetup
- STAFFING > STAFF MANAGEMENT > POSITION & ASSIGNMENT
- Verify Compensation setup
- STAFFING > STAFF MANAGEMENT > COMPENSATION
- Verify Subject Entity Maintenance
- Ensure tax configured if earnings are under another code
- Other Payments, etc
- PAYROLL > GROUP DATA > SUBJECT ENTITY MAINTENANCE
- Ensure tax configured if earnings are under another code
- Verify Statutory Deductions
- PAYROLL > EMPLOYEE > STATUTORY DEDUCTIONS
- No Overrides setup
- Standard Tax Exemption Amounts are configured
- PAYROLL > EMPLOYEE > STATUTORY DEDUCTIONS
- Verify if any Tax Reset
- PAYROLL > PAY PROCESS > PAY RUN DEBUG > PAY RUN LOG FILE
- PAYROL > PAY PROCESS > TAX ANALYZER
PROCESS OVERVIEW
STEP 1: Verify Tax Tables
PAYROLL > BOARD > FEDERAL TAX DATA
Disclaimer: This is sample Federal Tax Data; boards & districts are responsible for verifying their data.
**Current Federal Tax Data configured**
STEP 2: Verify Position data
STAFFING > STAFF MANAGEMENT > POSITION & ASSIGNMENT
**Current Active Positions**
It can be common to see multiple Active Position records here for different types of Employees. In this scenario this would become important further downstream for troubleshooting tax reset over inconsistent earnings.
STEP 3: Verify Compensation data
STAFFING > STAFF MANAGEMENT > COMPENSATION
**Current Compensation record matches Position data**
STEP 4: Verify Subject Entity Maintenance configuration
Note this is mainly applicable for periodic or one-time earnings under different Codes.
Example: Employee on leave, paid MATTOPUP earnings.
PAYROLL > BOARD > OTHER PAYMENTS MAINTENANCE
**Other Payment Code is Active**
PAYROLL > GROUP DATA > SUBJECT ENTITY MAINTENANCE
**MATTOPUP is configured to be REG_TAX applicable**
STEP 5: Review Employee Statutory Deductions
PAYROLL > EMPLOYEE > STATUTORY DEDUCTIONS
**Tax Credit Exemption Amounts are correct + No Tax Adjustment is configured**
**Ensure Deduct Federal Tax = Yes**
This is also reflected at the top of the second page in the Tax Analyzer Report.
**Verifies Statutory Deductions configuration**
STEP 6: Verify if any Tax Reset has occurred.
The first and easiest way to note this would be in the Tax Analyzer Report and then comparing it to the Pay Run Log File from a Pay Run Debug.
PAYROLL > PAY PROCESS > TAX ANALYZER REPORT
**Tax Analyzer outlines Tax Reset**
In the above example, the Tax Reset is supported by the outlined YTD section being blank. This is because when tax is reset for this pay, all YTDs are removed from consideration in the calculation.
Note: The system processes this by adding ENTITY TYPE = PAYNUMBER which you can see under YTD Record Adjustments.
This is how the system marks it tax restart, as the Pay Run engine uses tax records with NULL Entity types as this is its way of ensuring when tax is restarted, the annualization starts fresh at that point in time.
**Tax Analyzer reflects 8.77 in Tax deducted - matches the findings from the Pay Run Log File**
PAYROLL > PAY PROCESS > PAY RUN > PAY RUN DEBUG > PROCESS > COMPLETED > PAY RUN LOG FILE
**CurTax matches the Tax Analyzer Report**
Once determined a Tax Reset has occurred, this will be reflected in the YTD Record Adjustments module as denoted by records with ENTITY CODE = PAYNUMBER at which the Reset occurred.
PAYROLL > PAY PROCESS > YTD RECORD ADJUSTMENT
**In this example, Entity Code = 202601 denotes a tax restart on PAYNUM 202601**
IMPORTANT TAKEAWAYS:
1: Very Low or Zero Tax is usually a reflection of Tax Resetting for one reason or another
IMPACT: The reason why a tax reset can matter so much is the recalculation of projected YTD Earnings.
In this case, when annualization is reset - all YTDs are now ruled out, and the system will look at the current pay amount and any projected future earnings to extrapolate to the end of the year.
If this happens part way through the year; given the current earnings + projected remaining earnings - the system could calculate very low/zero taxes as the projected earnings might barely surpass the Basic Employee Tax Credits.
Sample values are outlined below;
ROOT CAUSE: The main thing that triggers tax resets would be inconsistent earnings. This is common with Employees who have second or third positions.
If an Employee misses a few pay periods, meaning that the pay was processed but there was no Pay Records generated for the EID in that pay period, then earnings happen again at a later pay – the system will call these inconsistent earnings and trigger the annualization process to be reset as per CRA and HRP guidelines.
WORKAROUNDS AVAILABLE:
1: Override to reconcile tax amount during pay run in question
If you are looking to adjust the tax being deducted within the current pay period, this can be completed as outlined below.
PAYROLL > EMPLOYEE > STATUTORY DEDUCTIONS
**Configure desired Pay Period duration and the Employee Tax adjustment amount > Save**
2: Configure Earnings to be Redirected to OTHER_TAX_GROSS under Secondary Positions with inconsistent earnings
PAYROLL > EMPLOYEE > STATUTORY DEDUCTIONS > SAMPLE EID
**Redirect Taxable Incomes from Secondary Groups to OTHER_TAX_GROSS = YES**