Creating Deductions

Use the Deduction Table - Tax Class page (DEDUCTION_TABLE2) to set up deductions for the variable taxation benefit plans, and create the tax alteration deduction codes.

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Set Up HCM > Product Related > Payroll for North America > Deductions > Deduction Table > Tax Class

For a variable taxation benefit plan deduction, select Before-Tax. For a tax alteration deduction, select Taxable Benefit.

You should be able to easily identify tax alteration deductions that you design for use with variable taxation benefit plans. You can create an individual deduction for each benefit plan or create a single deduction to be used for all plans.

For example, you might give a tax alteration deduction for a dental plan a deduction code of DENTAX to identify it as a taxable benefit for dental plan premiums, while you might name a tax alteration deduction code representing all benefit plans BENTAX.

Typically, the total healthcare premium reduces both federal and state taxable gross. If the adult child portion of the health premium is to be taxable at the state level, then assign the value to the Non-Taxable Before-Tax Benefit deduction class. Accordingly, this deduction class must also be added to all applicable health care deduction codes. The Taxable Gross Component ID is available to add to the federal taxable gross. That means: state taxable gross amount = federal taxable gross amount + the adult child health premium.

The deduction class is ideal because it has no impact on the federal taxable gross amount calculation, and is not deducted from the employee’s pay. Its purpose is to record the amounts for year-end balances. It is currently used mostly for 401k Employer Match.

Use the General Deduction Table page (GENL_DEDUCTION_TBL) to define general deduction rules for tax alteration deductions.

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Set Up HCM > Product Related > Payroll for North America > Deductions > General Deduction Table > General Deduction Table

For each tax alteration deduction, you need to create a matching entry on the General Deduction table with a matching deduction code.

From the General Deduction table, you'll be prompted to enter the deduction code for the tax alteration deduction, as defined through the Deduction table. The default deduction calculation routine is Flat Amount, which is the correct routine for the tax alternation deduction.

To indicate that the tax alteration deduction is a taxable benefit general deduction for use with the Credit Allocation table, select the Ben Admin Taxable Ben (Canada) (benefits administration taxable benefit) check box.

Use the Company General Deductions page (GDED_COM_TBL) to link tax alteration deductions with company general deductions.

Navigation:

Set Up HCM > Product Related > Payroll for North America > Deductions > Company General Deductions > Company General Deductions

For each applicable company, add the tax alteration general deductions that you create to the overall list of general deductions.