| How to set up a local tax |
Resolution | [BCB:5:Third-party support:ECB]
Section 1: Set Employee Defaults - Select Maintain, Default Information, Employees
- Select the Employee Fields tab
- On the first available line, enter Local_Tax for Name
Note: If the local tax field is already listed then proceed to the next section - Select a G/L account (normally a liability account)
- Check Calc; in the Formula field, enter **LIT
- Select the Adjust button
- Check Use next to Gross under Employee Fields, as well as any taxable payroll addition fields (tips, etc.) or pre-tax deduction fields (insurance, retirement plans, etc.)
- Select OK, then select OK again
Note: The next section of this article are OPTIONS which means only 1 option is necessary for your local formula to work. After choosing one Option, proceed to Section 2) Option 1: Basic Formula Note: Sage does have some local income tax (LIT) formulas that it provides with Sage Payroll. If the formula is listed in Sage-Maintained then we encourage to use this formula instead of creating one. To check and see if Sage provides the formula Select File, Payroll Formulas, Sage-Maintained. If the formula is listed in the drop down then take note of the Locality Name. If a specific locality exists for a sage-maintained formula, it would only work for employee records set to that specific state and locality combination. In certain cases, there may be multiple different formulas with different localities. In each case, it is important to designate the correct formula ID and locality on the desired employee record. Use these steps if the tax is a basic percentage of gross pay, with no yearly limit or allowances; skip to Section III if your tax does include these options. - Select File, Payroll Formulas, User-Maintained.
- For Formula ID enter XXLIT, with XX being the 2-letter state abbreviation (i.e., GALIT).
- For Name, enter XXLIT YY, with XX being the state abbreviation and YY being the 2-digit payroll year (i.e, GALIT 13).
- Set Effect on Gross Pay to Subtracts from Gross.
- Set Filing Status to All.
- For How do you classify this formula? select Tax.
- For Tax Agency select Locality.
- Set All localities?:
- If the tax applies to all localities, select Yes and skip to Step 10
- If each locality has its own rate, select No and continue to the next step
- Enter a Locality Name of up to 8 characters; this must match exactly what is entered on the employee records' Withholding Info tab for Locality on the Local line.
- For Formula, enter the following:
PERCENT=X.XX; ANSWER=-ADJUSTED_GROSS*PERCENT%
replacing X.XX with the tax rate - Select Save.
- If you have multiple localities, change the Formula ID slightly (for example, GALITa), and change the Locality Name and Percent to the name and rate for each locality, then click Save.
- Once all local tax formulas have been created, close the User-Maintained Formulas window.
Option 2: Advanced Formula Use these steps if your local tax needs to use allowances or limits. - Select File, Payroll Formulas, User-Maintained Formulas.
- For Formula ID enter XXLIT, with XX being the 2-letter state abbreviation (i.e., GALIT).
- For Name, enter XXLIT YY, with XX being the state abbreviation and YY being the 2-digit payroll year (i.e, GALIT 13).
- Set Effect on Gross Pay to Subtracts from Gross.
- Set Filing Status to All.
- For How do you classify this formula? select Tax.
- For Tax Agency select Locality.
- Set All localities.
- If the tax applies to all localities, select Yes and skip to Step 10.
Note: If each locality has its own rate, select No and continue to the next step. - Enter a Locality Name of up to 8 characters; this must match exactly what is entered on the employee records' Withholding Info tab for Locality on the Local line.
- For Formula, enter the following:
E=0.00; "E is Exemption Amount per Local Allowance" D=0.00; "D is the Allowance Amount per Dependent" M=0.00; "Maximum Tax (0 if no maximum)" PERCENT=0.00000; "The value user entered for Locality %" A=PRORATE((ANNUAL(ADJUSTED_GROSS)-(E*EMP_LOCAL_ALLOWANCES)-(D*EMP_LOCAL_NUMBER))*PERCENT%); ANSWER=-IF(M=0,A,IF((ABS(YTD(Local_Tax)-Local_Tax)+A)>M,M-ABS(YTD(Local_Tax)-Local_Tax),A))
replacing X.XX with the tax rate. - Select Save.
- If you have multiple localities, change the Formula ID slightly (for example, GALITa), and change the Locality Name and Percent to the name and rate for each locality, then click Save.
- Once all local tax formulas have been created, close the User-Maintained Formulas window.
Section 2: Add to Tax Forms - Select Maintain, Payroll, Payroll Settings.
- Select Taxes, then Assign Tax Fields.
- Select W-2 Fields.
- For Local Income Tax line, select Local_Tax.
- Select OK, then Finish.
Section 3: Set Employees to Use the Local Tax - Select Maintain, Employees/Sales Reps and select an employee.
- Select Withholding Info.
- On Local line, in the State/Locality field, enter the employee's locality exactly how it was entered in Option 1 Step 9 or Option 2 Step 10. If the local tax applies to all localities, type the locality name.
- Select Save.
- Repeat for each employee.
- On any employees that do not pay local income tax: Select the Employee Fields tab.
- Uncheck Use Defaults on the Local_Tax line.
- Uncheck Calc.
- Select Save.
Note: If there is more than 1 local tax that may apply to one employee, but the taxes needed to be reported separately (for example, a city income tax and a school district tax), create two payroll fields, 1 for each, and give the formulas distinct Names; for example, name the city income tax GALIT and the school district tax Fulton (the school tax would be set to apply to all localities). [BCB:161:Chat 50 US:ECB]
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