You can configure Dayforce to withhold income tax based on a project in Dayforce that earnings are recorded against. This is different from the default behavior where employees are taxed based on the tax address of their work assignments.
For example, an employee might need to visit a client off-site in a different state to provide a product demo. In this case, there is no secondary location in the employee’s org tree to record earnings against.
Important: This feature applies only to US employees working in the US. It doesn’t apply when US employees work outside of the US.
With this functionality, you can assign a tax address to individual projects in Dayforce. When employees record earnings against a project that has a tax address defined, Dayforce taxes the employee based on the project address rather than the work assignment that the earning is recorded against. When they select a project with a tax address, it takes priority over the tax address of the work assignment.
For example, an employee has a primary work assignment in New York State and needs to work at a client’s location in Pennsylvania. When the employee records earnings against a project that has the address in Pennsylvania configured, Dayforce withholds state and local income taxed based on the address in Pennsylvania rather than the employee’s primary work assignment.
Before you configure project taxation in Dayforce, you should consider the following points:
- Regardless of the project address, Dayforce continues to withhold state disability or unemployment taxes based on the employee’s primary work assignment.
- This functionality isn’t applicable for pay groups where taxation in multiple jurisdictions has been suppressed. To review these settings, open Pay Setup > Pay Group, select a pay group from the list, and click the Payroll Properties tab. If the Disable Multi Jurisdiction Taxation setting is selected, then taxation in multiple jurisdictions is suppressed for the pay group.
- When an employee records earnings against a project with a tax address configured, the following occurs:
- Dayforce adds applicable taxes to the employee’s tax definitions. You can review these settings by opening the People feature, loading the employee profile, and clicking Payroll > Tax Definitions. The Employee Payroll Tax section lists the new taxes that are applicable for the jurisdiction (for example, state and local income tax), and a green checkmark is shown in the first column next to the newly added taxes.
- Dayforce adds the applicable taxes to the legal entity of the work assignment that the employee records the earning against. You can review these settings in Org Setup > Org Payroll Setup > Legal Entity by selecting the legal entity record and clicking the Tax Authorities tab. Dayforce shows the new taxes that are applicable for the jurisdiction (for example, state and local income tax).
- This functionality is supported for virtual employees (that is, employees who don’t work at a physical location in your organization).