When employees meet a state income tax threshold, the application updates the taxes for the earnings that fall within the current pay run and pays the employee appropriately. However, when there are amounts from one or more committed pay runs that contributed to the threshold, you need to run a wizard process to adjust the taxes for these amounts.
Before You Begin: For quick instructions, see Run the Wizard for Retroactive State Tax Threshold Adjustments.
For example, an employee has a primary work assignment in Missouri, and a secondary work assignment in Kansas. Say that, for Kansas, you set up a state tax threshold of 5 days.
In the current pay run, the employee records 1 day of earnings at the Kansas work assignment. Because the employee does not meet the threshold during this pay period, the application continues to withhold state income tax based on the employee's primary work assignment (Missouri).
Now say that the above pay run is committed, and that in the next pay period, this employee works another 4 days in the secondary work assignment (Kansas). Thus, the 5-day threshold is met for the year (1 day from the past pay period plus 4 days in the current pay period).
Because the threshold is met, the application withholds state income tax for Kansas for the 4 days of earnings in the current pay run. This is seen in the following earning statement preview, where application withholds income tax for Kansas for 4 days (32 hours):
However, the 1 day that the employee worked in the previous pay period occurred before the threshold was met, and thus, is still taxed based on the primary work assignment (Missouri). Seen in the following earning statement from the previous pay run, the employee is taxed $6.80 ($4.00 for Missouri income tax and $2.80 for St. Louis local income tax):
If the employee had worked one day in Kansas, and there was no threshold set up, the employee would have been taxed $6.00 for Kansas income tax:
In applying taxes based on the primary work assignment for the 1 day, the application overtaxed the employee by .80¢ ($6.80 in Missouri state and local income tax minus $6.00 in Kansas income tax).
Tasks Performed by the Wizard
Using the wizard process, you can automatically generate adjustments to correct the taxes for previous earnings that contributed to a threshold. As an optional feature of the wizard, you can also automatically generate quick entries to reimburse employees (in the case where they are over taxed) or to collect amounts from them (in cases where they were under taxed).
The wizard only adjusts taxes for earnings that contributed to each threshold during the threshold's current look-back period. For example, say you create a threshold with a quarterly look-back period and the employee meets the threshold on April 17. When you run the retroactive adjustment wizard during the same quarter, the application checks back to April 1 (the start of the quarter) for taxes to adjust. However, if you run it in the next quarter, the application checks back to the start of that quarter (July 1) and it cannot look-back to the previous quarter.
When you run the wizard, the application checks pay runs based on the look-back period you defined for each threshold. See State Tax Threshold Configuration.
When to Run the Wizard
Before you can run the wizard process for an employee, you need to first commit the pay run where the employee met the threshold. This is because application calculates adjustments and quick entries based on committed payroll data. Continuing the earlier example, you need to commit the pay run where the employee works 4 days at the Kansas work assignment (that is, the pay run where the employee met the threshold).
Once you commit the pay run where the employee met the threshold, you can run the wizard process in the current or next scheduled regular pay run, or in an off-cycle run.
It is a best practice to run the wizard on every regular pay run to check for employees who met a threshold in the previous pay run. If employees meet a threshold in the current pay run, their taxes aren’t adjustable until you commit this pay run, and then run the wizard in the next pay run or an off-cycle pay run.
As an additional best practice, you should run the wizard in an off-cycle pay run at the end of each calendar quarter to check for employees who met a threshold in the quarter end regular pay run, and generate the necessary adjustments within the quarterly cutoff deadlines.
Launch the Wizard
When you load a regular pay run, or an off-cycle pay run that has the Normal Off Cycle type, in the Pay Run Management tab of Payroll, you can access the wizard by opening the Quick Entry sub-tab and clicking Sync Pay Changes in the toolstrip.
When you load an off-cycle pay run that has the Prior Period Adjustment type, Sync Pay Changes is displayed in the Adjustments sub-tab instead, because the Quick Entry sub-tab isn’t available for Prior Period Adjustment pay runs.
To enable your role to see the Sync Pay Changes button, go to System Admin > Roles and select your role from the list. Click the Features tab, expand Payroll > Pay Run Management > Quick Entry, select the Sync Pay Changes checkbox, and save your changes.
The Payroll > Pay Run Management > Quick Entry > Sync Pay Changes role feature also enables the Sync Pay Changes button that is shown in the Adjustments sub-tab for off-cycle pay runs that have the Prior Period Adjustment type, because these pay runs don’t include the Quick Entry sub-tab. However, the application displays the Sync Pay Changes button in the Quick Entry sub-tab for normal pay runs and off-cycle pay runs that have the Normal Off Cycle type.
Using the Wizard
When you click Sync Pay Changes, the application opens the Sync Pay Changes wizard, which contains the Retro Multi-State Threshold Tax option.
Note: The Retro Multi-State Threshold Tax option of the Sync Pay Changes wizard is available to user roles by default and doesn’t require separate role feature access.
When you select the Retro Multi-State Threshold Tax option and click Next, the application displays the Select Pay Run step. Here, you select the pay run where you want the application to generate the quick entry to reimburse or collect tax amounts. The application displays the current and next scheduled pay run, as well as off-cycle pay runs that are associated with these pay runs.
When you click Next, the application displays the Confirm Selected Employees step, which lists the number of employees in the pay run who qualify for a pre-threshold tax adjustment (1 employee in the example below). This step also allows you to select the deduction and earning code that the application will use to reimburse amounts to or deduct amounts from the pay run that you selected from the previous step of the wizard.
The drop-down list for selecting a deduction only displays deduction codes that have the Post-Tax tax type defined in their deduction definitions. Moreover, the drop-down list for selecting earnings only displays earning codes that have the Reimbursement earning type defined in their earning definitions.
Selecting a deduction or earning code in this step is optional. If you leave these settings cleared, the application will not generate quick entries to reimburse or collect amounts nor adjust tax amounts. It will only make wage adjustments (which do not impact employee net pay). If you skip selecting a deduction and earning code, the employee is responsible for paying any amounts owing or requesting a reimbursement when they file taxes.
If you select a deduction and earning code, the application will generate a quick entry in the pay run that you selected from the previous Select Pay Run step of the wizard. However, the application always generates the adjustment to correct the wages and taxes within the pay run in which you are currently working.
When you click Next, Dayforce displays a confirmation message when the application has completed the adjustment process successfully.
Continuing the earlier example, where the employee is owed 80¢, the application adds a quick entry earning for 80¢ for the employee to the pay run that you selected in the Select Pay Run step of the wizard.
Note: If you are generating the quick entry in the same pay run where you submitted the wizard, you need to click Refresh for the application to display the quick entry.
Also, continuing the earlier example, when you open the Adjustments sub-tab in the pay run where you submitted the wizard, the application displays an adjustment with the following entries:
- The Deductions section includes an .80¢ debit entry using the deduction code that you selected from the wizard (the corresponding credit is applied in the .80¢ quick entry, shown above).
- The Taxes section displays the following entries:
- $6.00 credit to Kansas income tax
- $4.00 debit from Missouri income tax
- $2.80 debit from St. Louis local income tax
- Moreover, in the Taxes section, the Prior Run column (the column on the right end in the screenshot below) for each entry includes the pay run of the earning that the adjustment was for.
Say that you submitted the wizard without selecting an earning and deduction code. In this case, the application wouldn’t generate a quick entry to reimburse the employee. Moreover, the adjustment wouldn’t include an 80¢ debit entry in the Deductions section. Also, the entries in the Taxes section would be recorded as zero, but the Limited Taxable Wage and Total Taxable Wage columns of these entries would look the same.