This topic describes how to validate the wages and taxes being reported by the application in the quarterly file. This validation should be performed on an ongoing basis so that any issues are discovered early and can be corrected before the quarterly filing deadline.
Quarterly wages and taxes can be validated by running the US Wage and Tax Report, available from the Reports button in the Overview tab of Payroll. The report can be run for specific pay groups, legal entities, states, or other categories, and it includes all of the payroll data from committed pay runs within the quarter. The US Wage and Tax Report can help locate the following potential problems:
- Taxes that should have the same wage basis, such as the employee and employer Medicare tax, do not
- Taxes have been under-withheld for an employee
- Taxes have been over-withheld for an employee
For more information about this report, See US Wage and Tax Report in the Fixed Format Reporting Guide.
To run the US Wage and Tax Report for a quarter:
- Go to Payroll > Overview and click Reports.
- Select US Wage and Tax Report in the list of fixed format reports.
- Select the Quarter radio button.
- In the Quarter and Year drop-down lists, select the quarter and the year for which you want to report.
- Complete the rest of the options to tailor the report to your needs.
- Click Run Report.
When the report is ready, it is available to download in Message Center.
The application can display a set of records for each employee that has some issue with the wages and taxes currently reported in the quarter; for each tax, the application reports on the wage basis and tax amount paid, as well as a message underneath describing the issue with the tax.
The application can display messages if:
- A tax is under withheld: The application flags which taxes are under withheld and by how much. It also displays the taxable wage basis being reported and the tax rate being used.
- A tax is over withheld: The application flags which taxes are over withheld and by how much. It also displays the taxable wage basis being reported and the tax rate being used.
- A tax does not have the same wage basis as other taxes with the same taxability: The application flags which taxes have a different wage basis than taxes that should have the same wage basis and lists all of the taxes that it doesn’t match with.
In this example, the NJ DT EE tax has a wage basis of $150, which doesn’t match the wage basis for several other taxes, even though it should:
Correcting the issues displayed in the Wage and Tax Report requires an investigation into the root cause of the problem and often requires a tax expert's knowledge to determine the appropriate response.
The following are some additional steps that you can take:
- Determine if the issue needs to be corrected in the application and reported: Not all issues raised by the validations the application performs need to be corrected and sent as part of the quarterly reporting process; if an employee tax is under or over withheld, this issue might not require any action, depending on the size of the amount.
- For example, if an employee tax is over withheld by $55, that money is refunded to the employee when they file their taxes; similarly, if an employee tax is under withheld by $65, that employee will owe $65 when they file their taxes. If the dollar amount under or over withheld is of an acceptable size, then it doesn’t need to be corrected.
- Whereas if an employee has a tax that is over withheld by some material amount, such as $4,500, this should be corrected in the application so that the employee receives these funds without waiting to file their taxes at the end of the year.
- Run the Employee Pay Run History Report for the employee with wage and tax issues: You can run the Employee Pay Run History Report for a specific employee, for any number of pay runs, and the application returns the payroll register for that employee; run the report for each available pay period in the year, including any year-to-date (YTD) history import pay runs, and examine the details.
- You might be able to determine in which pay run the wage basis for two taxes that should match became out of sync; for example, if the tax amount and wage basis was imported for one tax but not another during the YTD history import the Employee Pay Run History Report will only show a wage basis and tax amount for one of the matching taxes in the pay run with the YTD data load.
- Check relevant areas of configuration: You can check the configuration and parameters of taxes with issues at both the employee level in the Payroll > Tax Definitions screen in People and at the employee's legal entity level in the Tax Authorities tab of Org Setup > Org Payroll Setup > Legal Entity.
- Was the tax with an issue incorrectly marked as exempt or blocked for part of the quarter? For taxes that can have a rate specified in the Experience Rate tax parameter, such as state unemployment taxes, was the tax configured with the correct rate? Was that rate effective for the entire year or quarter?