Calculate Payroll taxes for states other than the work states

Sage can't provide tax advice or guidance on setting up reciprocity agreements. We aren't responsible for improper setup of a reciprocity agreement or taxes that calculate incorrectly due to the setup. Work with your tax professional to confirm that you set up your reciprocity agreements in compliance with state laws and requirements.

How Payroll determines the tax state

Payroll taxes calculate based on the Work State. It retrieves the Work State based on the following hierarchy.

1. The State on the Scope and PR tab of the job setup in Job Cost.
2. If you don't enter a job on the time, it retrieves the Work State from the employee setup. Verify the state on the Employee Entry info tab.

If you select the Use employee work state/local option on the employee, it uses the employee Work State regardless of the state on the job.

Considerations for tax changes

If you have an employee who wants to calculate withholding taxes in addition to, or to replace the job Work State, review these considerations.

Global reciprocity agreements

If the Work State has a Reciprocity Agreement with the Resident State, you can set up a global reciprocity agreement. You can also set up an employee-level reciprocity agreement. When you set up a Global Reciprocity Agreement, this affects all employees who reside in one state and work in another on that agreement.

There are three types of Global Reciprocity Agreements. Only the Balance and Take both agreement types will calculate a Taxable and Subject-to value for both states.

Employee reciprocity

You can set up an Employee Reciprocity agreement with an adjustment method of Replace. This won't show a Taxable or Subject-to for the tax that you're replacing.

If the employee occasionally works in other states and they're concerned about under remitting taxes, they can use an adjustment on their taxes. They can increase the Withholding tax by using an Adjustment Method. Set this up on the employee tax record for those specific employees.

Tax reporting

For a withholding tax to calculate automatically, the Check Tax record must contain a Taxable and Subject-to value. Manually adding a withholding tax to a check doesn’t create these records.

Aatrix reporting retrieves Taxable and Subject-to amounts. If no Taxable or Subject-to record exists for that state, the Aatrix tax reports can report the tax incorrectly.

We don't recommend manipulating these reports manually. Changing these reports can lead to errors when reporting your taxes.

How do I verify that Payroll taxes calculate correctly?