We’ll begin with a basic formula such as, ANSWER=ADJUSTED_GROSS. This formula states that the amount that will populate the field on the check is equal to the amount of Adjusted Gross income as defined by the Adjust buttons for the payroll field that uses this formula.

For example, the adjust button has Gross and K401 selected for use in the Adjust area. Gross is equal to 1000.00 and the K401 is -100.00 so your adjusted gross would be 900.00, and therefore your formula is stating that ANSWER=900.00.

Next, let's look at something a little more complicated:

ANSWER=ADJUSTED_GROSS*EMP_LOCAL_NUMBER%

This formula takes the Adjusted Gross and multiplies it by a percentage. The number in the Local Additional Withholding box on the employee's record determines the percentage.

The breakdown (We’ll assume that the number in the Local Additional Withholding box is 5 and use the example above to determine Adjusted Gross):

ANSWER=ADJUSTED_GROSS*EMP_LOCAL_NUMBER%
ANSWER=900*5%
ANSWER=900*0.05
ANSWER=45

Note: Our formulas thus far have been positive numbers; however, most formulas are used for deductions and therefore would have a minus (-) sign after the equals (=) sign. If you don’t have a minus (-) sign in your deductions formula, then the formula won’t calculate.

Now, let us add a few more lines to the formula and see what happens. This is the basic SUI formula. It incorporates a Limit, and the percentage is defined in the formula instead of pulling from the employee record as in our last example. It also uses a basic If, Then, Else statement. (IF something is TRUE, THEN do this, ELSE do something else). Again, we’ll use the gross example from our first formula except that K401 won’t be checked for use in this Field's Adjust button and we’ll assume they haven’t reached the Limit.

LIMIT = 26700; Cut off at which the formula stops calculating
PERCENT = 5.0; Percentage to be used later in the formula later
TAXABLE_GROSS = YTD_LIMIT (ADJUSTED_GROSS, LIMIT); Line containing If, Then, Else statement.
ANSWER = -TAXABLE_GROSS * PERCENT% Answer line

The calculation:

TAXABLE_GROSS = YTD_LIMIT (ADJUSTED_GROSS, LIMIT ); This line is determining what Taxable Gross is (used in certain reports.) Essentially determining if the Adjusted Gross wages have reached the limit. If they haven’t, it then determines if the wages on this check will then put the gross over the limit and, if so, determines the difference. For example, the limit is $26700 YTD wages have been $26000. Wages this check are $1000; therefore $700 is the difference and is therefore taxable while the $300 is over the limit and not taxable. If the wages this check wouldn’t cause the limit to be exceeded, then the full $1000 would be taxable.

ANSWER = -TAXABLE_GROSS * PERCENT% Taxable gross is then multiplied by the percentage

The breakdown: (assuming the employee hasn’t reached the limit and won’t exceed the limit this pay period)

ANSWER=1000*PERCENT%
ANSWER=1000*5%
ANSWER=1000*0.05
ANSWER=50

Above we’ve worked with a basic formula and a formula with a limit. We’ll now look at a formula that uses a progressive structure. In other words, the amount of tax deducted will change based on the wages your employee earns.

ANSWER = -PRORATE (TABLE (ANNUAL (ADJUSTED_GROSS) - (EMP_FEDERAL_ALLOWANCES * 3950))) - EMP_FEDERAL_EXTRA

This is the FIT Single calculation as of April 2014. And before we can start, we need some additional information. We know the employee is claiming to be single based on the calculation we have chosen. But we also need to know how many allowances they’re claiming and if they’re having any additional withholding deducted. We’ll also need to know the pay frequency and what the Adjusted Gross income is. For this example, we’ll assume the employee is claiming 1 deduction and has no additional withholding. They are paid on a bi-weekly basis and their gross is $1000 but they have a $100 pretax 401K deduction.

We know the following:

Filing Status = Single
Allowances = 1
Pay Frequency = Bi-weekly (26 pay periods)
Adjusted gross income = $900 ($1000 - $100) ($100 from 401K)
With equations in parentheses, we’ll want to start from the inside out.

ANSWER = -PRORATE (TABLE (ANNUAL (ADJUSTED_GROSS) - (EMP_FEDERAL_ALLOWANCES * 3950))) - EMP_FEDERAL_EXTRA

We know the ADJUSTED_GROSS is $900.

ANSWER = -PRORATE (TABLE (ANNUAL (900) - (EMP_FEDERAL_ALLOWANCES * 3950))) - EMP_FEDERAL_EXTRA

We also know that they’re claiming 1 allowance.

ANSWER = -PRORATE (TABLE (ANNUAL (900) - (1 * 3950))) - EMP_FEDERAL_EXTRA

The ANNUAL statement simply means to multiply the amount by the number of pay periods in the year. (In our case, 26)

ANSWER = -PRORATE (TABLE (23400) - (3950))) - EMP_FEDERAL_EXTRA

Consolidate

ANSWER = -PRORATE (TABLE (19900)) - EMP_FEDERAL_EXTRA

The TABLE statement is telling us to compare the Amount with the table for the formula. When we click the Set Up Tax Brackets button, the Set Up Tax Brackets window opens.

The table is saying, "If your taxable income is more than (B) withhold C+ (D% of (A-B))." Or C+(D/100(A-B))=E (E being the number we’ll plug back into our formula.) Let's look at this in real numbers.

A=19900 The employee taxable income is more than 10300 but less than 33960 so we’ll use the 10300 line to do our calculation.
B=10300
C=765
D=15

So our equation will look like this:
765+(15/100(19900-10300))
765+(0.15(19900-10300))
765+(0.15(9600))
765+(1440)
2205

Our formula was this:

ANSWER = -PRORATE (TABLE (19900)) - EMP_FEDERAL_EXTRA

And is now this:

ANSWER = -PRORATE (2205) - EMP_FEDERAL_EXTRA

The PRORATE statement is then telling us to divide by the number of pay periods in the year. (26 as per our example). Which makes our formula this:

ANSWER = -84.81- EMP_FEDERAL_EXTRA

Remember we said there was no additional withholding:

ANSWER = -84.81-0

So our answer is:

ANSWER = -84.81

Another way to look at this is to annualize the income (23400) and subtract your allowances (3500).  And compare that amount to the table.

As earlier, our employee falls into the more than 10300 but less than 33960.

Our taxable income is 19900 so far. We subtract the "If taxable income is over" amount of 10300, which then gives us 9600. We multiply the 9600 by the "Plus %" amount of 15%, which gives us 1440. Then we add the "Withhold" amount of 765 to the 1440 and get 2205. Now, we need to de-annualize or prorate our answer by dividing it by the number of pay periods in the year. 2205 divided by 26 is 84.81.

This should give you a basic understanding of how Sage 50 calculates payroll taxes.

For additional information about Payroll Tax Formulas, select Help from the Sage 50 menu and then select Help. On the Search tab, enter Payroll Formulas. Sage 50 lists many helpful topics about payroll formulas.