How to create a local tax authority?

Owned by Kyle Niekamp
03 27, 2020

Issue/Symptom/Question

I need instructions on how to set up local earnings taxes.

Applies To

PENTA for Windows

Payroll - Local Taxing Authority

Resolution/Fix/Answer

Local Taxing Authority records provide values necessary for processing local withholding taxes. Some values are locality-specific. Refer to publications issued by individual localities for rate and other requirements of the localities your employees reside and work in.

A. Enter basic information for the Local Taxing Authority.

Payroll > Setup > Taxes > Local Taxing Authorities

  1. Enter values in the following Master tab fields:
    • Locality Code
    • Name
    • State Code
    • Tax Type Code
    • Reciprocity Group (enter if you use Reciprocity Groups for administering Reciprocity Rules for this locality)
    • ADP Local Code (enter if ADP provides local tax filing services for you)
    • EFW2 Tax Type
  2. Enter values in the Accounting tab fields:
    • Accrual Account
    • Vendor Id
  3. Enter values in these Calculation tab fields:
    • Use Annualized Amounts
    • Must Live & Work in Juris
    • Self-Adjust W/H Amt
    • Effective Date
    • Withholding Operations:
      • Order #
      • Operation # 
  4. Exit the window to commit the changes

B. Assign Local Taxing Authority to Employees

Payroll > Employees > Employee Payroll Information

  1. Identify an Employee you want to assign a Local Taxing Authority to.
    1. You can either query an existing record or create a new one.
  2. Enter values in the following Master tab fields:
    1. Resident Lcl Tax Auth
    2. (Optional) Work Loc Lcl Tax Auth
    3. Note: Entering a value in the Work Loc Lcl Tax Auth field affects the tax jurisdiction selection hierarchy PENTA applies during payroll processing. The hierarchy is:

1. Timecard override
2. Employee Work location Local Tax Authority
3. Job or Work Order Local Taxing Authority
4. Employee Resident location Local Tax Authority

**(Optional) Enter values in the following Local W/H tab fields:

      • Local Code
      • Withholding Status
      • Number of Dependents
      • Subject to Local W/H
      • Fixed Withholding Amount or Override Annual Amount (displays for PA Local Taxing Authorities only)
      • Fixed Withholding Pct
      • Add’l Withholding Amount or Fixed per Period Amount (displays for PA Local Taxing Authorities only)
    3. Repeat Steps 3.A.1 – 3.A.3 for each employee affected.
    4. Close the window to commit your changes.

C. Assign Local Taxing Authorities to deductions

If any of your Local Taxing Authorities have taxation rules different from the default taxation set up for your deductions in the Master Deductions window, enter taxation overrides for those Local Taxing Authorities. Otherwise, proceed to Step 3.C.

Payroll > Setup > Deductions, Reimbursements and Other Compensations > Master Deductions

  1. Identify a deduction you want to assign Local Taxing Authorities to.
    1. You can either query an existing record or create a new one.
  2. If the Local Taxing Authority’s tax calculation differs from the Reimbursement’s default tax calculation (noted in the “As a default, add (B)efore or (A)fter taxes are calculated (B/A)?” field), enter the following values:
    1. Local Code
    2. Before/After Code
  3. Repeat Steps 3.B.1 – 3.B.2 for each deduction requiring taxation exceptions.
  4. Close the window to commit your changes.

D. Assign Local Taxing Authorities to reimbursements

If any of your Local Taxing Authorities have taxation rules different from the default taxation set up for your reimbursements in the Master Reimbursements window, enter taxation overrides for those Local Taxing Authorities. Otherwise, proceed to Step 3.D.

Payroll > Setup > Deductions, Reimbursements and Other Compensations > Master Reimbursements

  1. Identify a reimbursement you want to assign Local Taxing Authorities to.
    You can either query an existing record or create a new one.
  2. If the Local Taxing Authority’s tax calculation differs from the Reimbursement’s default tax calculation (noted in the “As a default, add (B)efore or (A)fter taxes are calculated (B/A)?” field), enter the following values:
    • Local Code
    • Before/After Code
  3. Repeat Steps 3.C.1 – 3.C.2 for each reimbursement requiring taxation exceptions.
  4. Close the window to commit your changes.

E. Assign Local Taxing Authorities to other compensation

If any of your Local Taxing Authorities have taxation rules that are different from the default taxation set up for your other compensations in the Other Compensation Information window, enter taxation overrides for those Local Taxing Authorities. Otherwise, proceed to Step 3.E.

Payroll > Setup > Deductions, Reimbursements and Other Compensations > Other Compensation Information

  1. Identify another compensation you want to assign Local Taxing Authorities to.
    You can either query an existing record or create a new one.
  2. In the Tax Code tab, enter a Local Code value for each Local Taxing Authority whose taxability differs from the other compensation’s Include In All Earnings field.
  3. Repeat Steps 3.D.1 – 3.D.2 for each reimbursement requiring taxation exceptions.
  4. Close the window to commit your changes.

F. Assign Local Taxing Authorities to fringe benefits

If any of your Local Taxing Authorities have taxation rules different from the default taxation set up for your fringe benefits in the Payroll Classes window, enter taxation overrides for those Local Taxing Authorities. Otherwise, proceed to Step 3.F.

Payroll > Setup > Pay Groups, Payroll Classes and Workers Compensation > Payroll Classes

  1. Identify a Payroll Class whose fringe benefit(s) you want to assign a Local Taxing Authority to.
    You can either query an existing record or create a new one.
  2. In the Fringe Benefits tab, click the Tax Rule Excep button.
    PENTA opens the Fringe Benefit Taxability Rule Exceptions pop-up window.
  3. Enter a value in the following fields for each Local Taxing Authority for which taxability differs from the default, adding the fringe to earnings before taxes are calculated:
    • Local Code
    • Before/After Code
  4. Repeat Steps 3.E.1 – 3.E.3 for each fringe benefit requiring taxation exceptions.
  5. Close the pop-up window and the main window to commit your changes.

G. Assign Local Taxing Authorities to jobs

Project Management > Jobs > Job Information

    1. Identify a Job you want to assign a Local Taxing Authority to.
      You can either query an existing record or create a new one:
    2. In the Other tab’s Payroll sub-tab, enter the Local Taxing Authority.
      Note: Entering a value in the Local Taxing Authority field affects the tax jurisdiction selection hierarchy PENTA applies during payroll processing. The hierarchy is:

1. Timecard override

2. Employee Work location Local Tax Authority

3. Job or Work Order Local Taxing Authority

4. Employee Resident location Local Tax Authority

  1. Repeat Steps 3.F.1 – 3.F.3 for each job requiring a Local Taxing Authority.
  2. Close the window to commit your changes.

H. Assign Local Taxing Authorities to work orders

Service Management > Work Order Information > Work Orders

  1. Identify a Work Order you want to assign a Local Taxing Authority to.
    1. You can either query an existing record or create a new one.
  2. In the Payroll tab, enter the Local Taxing Authority.
    1. Note: Entering a value in the Local Taxing Authority field affects the tax jurisdiction selection hierarchy PENTA applies during payroll processing. The hierarchy is:
      1. 1. Timecard override
      2. 2. Employee Work location Local Tax Authority
      3. 3. Job or Work Order Local Taxing Authority
      4. 4. Employee Resident location Local Tax Authority
  3. Repeat Steps 3.G.1 – 3.G.3 for each work order requiring a Local Taxing Authority.
  4. Close the window to commit your changes.