Issue/Symptom/Question

We incorrectly calculated Employee SIT and need to reduce and refund the amount. 

Applies To

PENTA for Windows

Payroll - Reducing and refunding employee SIT

Resolution/Fix/Answer

The following should be tested to ensure results are as required.

Note: entries such as these outlined recalculate SUT (employer tax) and due to employee specifics with regards to states, earnings and limits, occasionally incorrect SUT results (it should have no net effect). We recommend printing the PR Tax Status Report - State for employees' current UC states before and after the steps are executed to verify problems did not occur. If a problem appears, please send the before and after reports to PENTA Support and reference this article. 

To decrease SIT earnings and tax:

Step 1: Decreases SIT earnings; records tax payback; increases gross (to be removed in Step 2).

1) Create a new Other Compensation Information record or use an existing one using Calculation Base 3 - do not enter an amount.

• Update the Tax Code tab, set the 'Include In All Earnings' flag to “No”.
• Enter one exception in the State Exceptions block for the state SIT.

2) Process a Manual Check for the employee

•  Document Tab:

•  Check number = 0 (zero)
• Employee Id = employee needing adjustment
• Check Date = a date within the date range that needs to be adjusted and in an open period
• Net Pay = SIT amount to be reimbursed
• Accrue PTO, Process Reciprocity Rules and Process Linked Jurisdictions ALL = N
• Leave all other fields as defaulted

• Distribution Tab:

•  Work Date = same date as in the document tab
• Tab to OU ID and enter employee OU ID
• Tab to Account number – use account number identified for these adjustments
• Open the Default Employee Info pop-up window and enter affected state as the W/H and UC state
• Leave all other fields as defaulted

•  Withholding – USA Tab:

• In the STATE WITHHOLDING section, enter tax type SIT, State and NEGATIVE amount being refunded
• Leave all other fields as defaulted

• Other Compensation Tab

• Enter the Compensation Number being used
• Enter the NEGATIVE amount being reimbursed

•  Distribute the batch

Step 2: Removes the increase to gross wages

1) Remove the SIT exception from the Other Comp just set up. Leave the 'include in all earnings' set to No.

2) Process a Manual Check for the employee

•  Document Tab:

•  Check number = 0 (zero)
• Employee Id = employee needing adjustment
• Check Date = a date within the date range that needs to be adjusted and in an open period
• Net Pay = $0.00
• Accrue PTO, Process Reciprocity Rules and Process Linked Jurisdictions ALL = N
• Leave all other fields as defaulted

•  Other Compensation Tab

• Enter the Compensation Number being used
• Enter the POSITIVE amount being reimbursed

• Distribute the batch

Step 3: Increase Federal and State Ttl Gross Pay

1) Add or update a Master Deduction with calc base 1

• Update the Taxability tab to ‘B’efore tax
• Enter a State/Province Exception = STATE needing adjustment from employee record, Tax Types SIT - update taxability to ‘A’fter tax

2) Process a manual check entry per below – this entry increases Gross wages and Taxable Earnings for the exceptions by the amount of the adjustment:

• Document Tab:
  
  
• Check number = 0 (zero)
• Employee Id = employee needing adjustment
• Check Date = a date within the date range that needs to be adjusted and in an open period
• Net Pay = 0 (zero)
• Accrue PTO, Process Reciprocity Rules and Process Linked Jurisdictions ALL = N

•  Distribution Tab:
  
  
• Work Date = same date as in the document tab
• Tab to OU ID and enter employee OU ID
• Tab to Account number – use account number identified for these adjustments
• Tab to Gross Pay (Excl. Add to Gross Fringes) – enter positive amount of the local tax

•  Deductions & Fringes Tab:
  
  
• Deduction # and same amount as the Distribution Tab for the Amount Deducted:

•  Distribute the batch

3) Update the Master Deduction to ‘B’efore tax and remove all the exceptions

4) Process a Manual Check batch to decrease the Gross Pay and Deduction by the Local Tax

• Document Tab:
  
  
• Check number = 0 (zero)
• Employee Id = employee needing adjustment
• Check Date = a date within the date range that needs to be adjusted and in an open period
• Net Pay = 0 (zero)
• Accrue PTO, Process Reciprocity Rules and Process Linked Jurisdictions ALL = N

• Distribution Tab:
  
  
• Work Date = same date as in the document tab
• Tab to OU ID and enter employee OU ID
• Tab to Account number – use account number identified for these adjustments
• Tab to Gross Pay (Excl. Add to Gross Fringes) – enter NEGATIVE amount of the local tax

• Deductions & Fringes Tab:
  
  
• Deduction # and same amount as the Distribution Tab for the Amount Deducted:

• Distribute the batch

 Step 4: Refund employee

Pay the over-withheld SIT amount back to the employees by entering a fully non-taxable reimbursement on the timecards for the next check (or a reimbursement only check).  Reimbursements that are not taxed for anything are considered true reimbursements and are not part of gross or taxable wages in any way.