Sample Distribution For One Check

The following accounts should help to show how the distribution to General Ledger is performed:

The following accounts or partial accounts are entered in Payroll Setup.

The employee's accounts entered through screens 1 and 2 of the Employee File are:

The State and City Tax Code file contains a state and city code with the following accounts:

There are two accounts, 05633‑10000-00000, Shift Differential which is a taxable earning and 05630‑10000-00000, Travel & Subsistence which is a non‑taxable Earning, entered in the Deduction/Earning Code File application.  For an employee who was paid $560.00 the following transactions occurred.

These are a sample of accounting entries that would automatically be created after a normal payroll check has been printed and posted for the employee.  Should corrections need to be made at the payroll level you may use the Manual Transaction Processingapplication to reverse an incorrect amount or enter checks not in the normal payroll run.  Later, when the emp­loyer wishes to pay off certain liabilities, he may do so by using the Accounts Payable package through a prepaid voucher or he may directly enter the transaction through the General Ledger.

State And City Tax Calculations

The following is a description of how the fields in the Employee record, State and City Tax Code record, State and City Tax Code Table record, along with the employee's current payroll data are used to calculate the employee's state and city withholding tax.  The discussion below applies equally well to both the state and city calculations, though only state is mentioned.  Any differences between state and city calculations are specifically indicated.  It is assumed for simplicity that there are no supplemental earnings.  If there were, and there were not other types of pay recorded for the employee on the current payroll run, then the supplemental earnings tax percent of State and City Tax Code would be used to calculate the tax if this percent were not zero.  In all other cases, supplemental pay is added to all other types of pay, and tax is calculated on the total as described below.

1. If the employee has 99 as the number of SWT exemptions (field 27, screen 1 of Employee File Maintenance), then the SWT is simply equal to the value of the added SWT field on the Employee record (field 41, screen 1 of Employee File Maintenance).

2. If the employee has 98 as the number of SWT exemptions, then the SWT is computed by applying the value of the added SWT field as a percent to the employee's calculated taxable gross pay (this includes all wages and earnings except non‑taxable earnings).

3. If the number of SWT exemptions is neither 98 nor 99, the calculation proceeds using the state tax tables.  If the state table ID on the Employee record is blank (field 26, screen 1 of Employee File Maintenance), proceed to step 15.  SWT a fixed amount only.

4. The taxable gross pay is annualized by multiplying it by the number of pay periods in a year for this employee.  This is computed from the yearly periods entered on screen 1 of Payroll Setup.

5. The calculation method (field 3, screen 3 of State and City Tax Code File Maintenance, can be P = Percent of FWT or S = Percent of SWT, for the city tax calculation), go to step 12.

6. The standard deduction percent of gross pay (field 6, screen 3 of State and City Tax Code File Maintenance) is multiplied by the taxable gross pay to give the first trial value for the standard deduction amount.

    This is then reduced by the adjustment to the standard deduction (field 7, screen 3), and the result is compared to the minimum standard deduction amount (field 8, screen 3).  If the calculated standard deduction is less than the minimum, then it is set equal to the minimum.  The resulting value is then compared to the maximum standard deduction amount (field 9, screen 3), and if it is greater, it is then set equal to the maximum.  The result is the final value of the standard deduction amount for the year, i.e. annualized.

7. The taxable gross pay is reduced by the standard deduction amount, giving the adjusted taxable gross pay.

8. If a number has been entered for the SWT number of exemptions on the Employee record (field 27, screen 1 of Employee File Maintenance, rather than a dollar amount, this number is multiplied by the value of one yearly withholding allowance (field 10, screen 3 of State and City Tax Code File Maintenance), and the result is subtracted from the adjusted taxable gross pay.  If a dollar amount was entered for the SWT dollar exemptions on the employee record, then this dollar amount is subtracted directly from the adjusted taxable gross pay.  The result is the new value of the adjusted taxable gross pay.

9. If the answer to the Ded for Fica W/H? question is Y (field 5, screen 3 of State and City Tax Code File Maintenance), and then the annualized value of the FICA tax withheld (already calculated earlier in the program) is subtracted from the adjusted taxable gross pay obtained in step 8.

10.  The percent of FWT to deduct (field 4, screen 3 of State and City Tax Code File Maintenance), is then multiplied by the annualized value of the FWT (already calculated earlier in the program), and the result is subtracted from the adjusted taxable gross pay from step 9).

11.  It is at this point that the actual state tax table, itself, is used.  The adjusted taxable gross pay, as obtained in step 10, is compared to the Over amounts in the tax table, starting from the last non‑zero table entry (which should have the highest dollar amount).

    When the first Over amount is found that is less than the adjusted taxable gross pay, the excess is calculated by subtracting the Over amount from the adjusted taxable gross.  This excess is then multiplied by the Plus‑% value for that table line, and the result is added to the Tax‑Amt field for the table line.  This is the preliminary annualized State Withholding Tax amount.  Now go to step 13.

12.  If the calculation basis is a percent of Federal Withholding, the state tax table is accessed without any preliminary reductions of the employee's taxable gross pay.  The employee's annualized taxable gross pay is compared to the Over amounts in the tax table, starting from the last non‑zero table entry (which should have the highest dollar amount).  When the first over amount is found that is less than the annualized taxable gross pay, then the Plus‑% for that table line is multiplied by the annualized FWT to get the annualized State Withholding Tax amount.  (If the calculation basis is a percent of SWT ‑ in calculating CWT ‑ then SWT is used above, instead of FWT.)

13.  If there is a non‑zero value for the state tax credit on the employee record (field 28, screen 1 of Employee File), then this amount is subtracted from the annualized SWT of step 12.  Otherwise, if the SWT Number of Exemptions field on the employee record is a number and not a dollar amount, this number is multiplied by the Credit Per Exemption field (field 11, screen 3 of State and City Tax Code File), and the result is subtracted from the annualized SWT of step 12.

14.  The SWT of step 3 is now de‑annualized by dividing it by the number of pay periods in the year for this employee.

15.  The added SWT amount from the employee record is now added to the period's SWT amount in step 14.  This is the final value of the employee's SWT for the current pay period.