Issue/Symptom/Question

Reimbursement checks are taxed at a different rate than wages when processed as a separate check.

Applies To

Payroll Reimbursements

Resolution/Fix/Answer

When a reimbursement only check is processed, Penta will calculate taxes the same way it does any regular payroll check - 

• During the Gross to Net process, total gross earnings will be calculated for the payroll period
• These period wages will be annualized by multiplying this total by the number of pay periods in the employee's Pay Group's setup to equate to the employee's annual salary
• Penta will determine the tax rate for these annualized earnings and calculate the tax for the annual amount
• The total annual tax amount will be divided by the same number of periods as originally used to result in the taxes withheld for the current period's check

So, if the reimbursement check's amount calculates to a higher annual earnings than the employee actually makes with his salary or hourly rate, the tax amount would be commensurate with the higher earnings.  This will appear as a 'different' tax rate, when actually the mechanism to calculate the tax rate is the same for both normal checks and reimbursement only checks.  The earnings would simply be in a different (higher) tax bracket.