In the Flat Tax section of the Payroll > Tax Definitions screen in People, you can configure Dayforce to withhold a flat dollar amount or percentage of a federal or provincial/state income tax for employees. The flat dollar amount or percentage that you define overrides the default amount that Dayforce would otherwise withhold for these taxes.
You can use flat tax functionality to manage your net pay more easily in cases where an employee gets extra income later in the year. Consider an example where an employee has two jobs. In one job, the employee is in a higher tax bracket (25%) and in the other job, a lower tax bracket (15%). This is because Dayforce calculates the tax for the second job based only on what is known about the pay for that job (income from the first job isn’t known).
This can put the employee in a deficit when they file their taxes at the end of the year because the amount taken in the second job isn’t taken at the same rate as in the first job. You can configure Dayforce to tax the employee at a percentage that is similar to the first job's rate (for example, 25% instead of 15%), so the employee doesn’t have this deficit at the end of the year.
Functionality for US and Canadian Employees
For US employees, you can configure a flat tax amount or percent for the Normal check template so that the flat tax is applied to normal scheduled pay. You can also configure any custom check templates so that they allow flat tax to be applied for unscheduled payroll entries (that is, checks and quick entries).
For Canadian employees, for compliance reasons, you can't configure a flat tax for the Normal check template for normal scheduled pay. However, you can still configure any custom check templates to allow flat tax to be applied to unscheduled payroll entries.
Configuration Notes in the Payroll > Tax Definitions Screen
If you define a flat federal tax rate, Dayforce ignores the amount entered for the employee in the Additional Amount field in the Federal Tax Info section.
Depending on whether you define a federal or state/provincial amount, the flat tax override is applied to all federal or state/provincial taxable earnings.
When you use the Flat Tax section, note that the list only shows active overrides by default. To include historical records in the list as well, click the All button on the right side of the list:
Configuration Overview
Configuring this feature involves selecting the flat tax feature in custom check templates, and adding the flat tax overrides to the tax definitions in the employee record. For more information, see the following topics: