Tax Items

Use Tax Items to calculate payroll withholding, employer taxes, and other payroll adjustments.

HINT-- The Goldenseal payroll software already includes Tax Items for all US states and Canadian provinces.  You can easily import them into your company file.

TAX ITEM BASICS
       Entering Tax Items | Data Fields | Calculation Methods | Adjustment Fields
       Based On Field | Subtract From Field | Rounding | Base Periods | Deduction Calculation Order
       Payroll Basics | Payroll Setup | Using Lists | Category Taxes | Using Tax Items
       Worker's Comp

WEBSITE INFO LINKS
       Payroll Software | Payroll Accounting Software

RELATED TOPICS
       Benefit Items | Benefit Packages | Employee Accounts | Payroll Records | Tax Packages | Tax Tables
       Vacation Items | Vacation Packages | Wage Schedules | Writing Payroll

Entering Tax Items

To enter a Tax Item, follow these steps:

  1. Choose Payroll Setup from the Costs menu, then choose Tax Items from the submenu.
  2. Click the New button, or click on an existing item and click the Edit button.
  3. Enter details for the tax item.

Data Fields

Enter the following information for each Tax Item:

Name-- Type in a brief name for this tax item. This is the text that will appear in clairvoyant fields.
Comments-- Type in any comments you'd like to make about this item.
Calculation Method-- Enter the way this tax item is calculated.
Tax Type-- Enter the type of tax this is.
Based On-- Choose the payroll base amount that is used to calculate this tax item.
Subtract From-- Choose the calculation stage where this tax item is subtracted.
First Adjustment-- Enter an adjustment which is applied after the tax is calculated.
Second Adjustment-- Enter a second adjustment which is applied after the tax is calculated.
Rounding-- Enter the way you'd like to round the final calculated value.
Tax Tables-- Some of the calculation methods use one to five Tax Tables to perform calculations. Enter them in the Table fields.
HINT-- If you don't see any Tax Table fields, then this tax doesn't need them.
Base Period-- Enter the time period used to calculate this Tax Item.
Allow Negative Total?-- If the calculated value may be negative, check this box.  If it is not checked, negative values will be changed to zero.
HINT-- Nearly all tax tables should have this checkbox turned off.
Pay To Type-- Choose the type of account to which this item is paid.
Pay To Account-- Use the clairvoyant field to enter the name of the account to which this tax item is paid.
HINT-- If you enter an Other Cost account, Goldenseal will track tax payments and let you pay them via the Pay Bills command.

Calculation Methods

Use the Calculation Method field to determine how the tax item is calculated.

Direct Dollars-- The item is a dollar amount.  Enter the dollar amount in the field to the right.  If the Based On field shows hours or days, the tax will be this amount times the number of hours or days.  Otherwise the tax is a flat dollar amount.
Direct Percentage-- The item is a simple percentage of the wage base amount.  Enter the percentage in the field to the right.
Tax Table-- The tax item uses a Tax Table to calculate the tax amount.  Select the Tax Table from the Tax Table field at right.
Marital Status Tables (Marital Tax Tables)-- The tax item uses up to five Tax Tables to calculate the tax amount for single, married, dual income, head of household and other marital states.  Enter the tables into the fields at right.  Most US states use Marital Tax Tables.
Double Tax Tables-- Two different tax tables are used-- the first to calculate a deduction, and the second for the primary tax. A small number of states use this calculation method. Enter the two tax tables into the Deduction Table and Tax Table fields.
CT Triple Tables-- This method is used only in Connecticut. It uses three tables- the first to calculate deduction, the second for the primary tax, and the third as a percentage credit.  Enter them at right.
Canada Federal Tables-- This method is used only for Canada federal tax.  It uses three tables for tax, surtax and credit. Enter them at right.
Canada Provincial Tables-- This method is used only for Canada provincial taxes.  It uses five tables for tax, surtax, credit, plus two adjustment tables.
Category Comp Rate-- The Tax Item uses the value in the Comp Rate field in the Category System.
Category Tax Rate-- The Tax Item uses the value in the Tax Rate field in the Category System.
Federal, State, Local, or Other Dollar Amount-- The Tax Item uses the value of the Federal, State, Local, or Other Withholding fields in the Employee Account.

HINT-- You may use the withholding fields for any type of tax deduction.  You can use the Custom Layouts command to rename the field titles in the Employee Accounts.

Comp Percent-- The Tax Item uses the value in the Comp Percent field in the Employee Account.
Disability Percent-- The Tax Item uses the value in the Disability Percent field in the Employee Account.
Other Percent-- The Tax Item uses the value in the Other Percent field in the Employee Account.

Tax Types

Use the Tax Type field to enter the type of tax this is.

Some Tax Items are withholding amounts which Goldenseal deducts from the employee's pay:
Fed Withholding-- items which are subtracted from the employee's pay for federal taxes.
State Withholding-- items which are subtracted from the employee's pay for state taxes.
Local Withholding-- items which are subtracted from the employee's pay for local taxes.
Other Withholding-- items which are subtracted from the employee's pay for other taxes.
Employee Credit-- The item is added to the employee's pay.
Employee Dues-- The item is subtracted from the employee's pay for union dues or similar items.
Other Employee Deduction-- Any other item subtracted from an employee's pay.

Some Tax Items are employer taxes which you pay, but which don't affect the employee's take-home pay:
Employer Fed Tax-- items paid by the employer for federal taxes.
Employer State Tax-- items paid by the employer for state taxes.
Employer Local Tax-- items paid by the employer for local taxes.
Employer Other Tax-- items paid by the employer for other taxes.
Employer Credit-- The item is paid to the employer by an outside agency.
Employer Dues-- The item is paid by the employer as dues to an organization such as a union.
Employer Insurance-- The item is paid by the employer as insurance for employees.
Other Employer Payment-- Any other type of payment that is paid by the employer.

Some Tax Items handle money that you collect from employees or pay directly to them:
Fixed Allowance-- A regular extra payment made to an employee for any reason, such repayment of a loan made by the employee to the company.
HINT-- You can also handle payments to an employee with a Benefit Item.
Fixed Repayment-- A regular payment that the employee makes to the employer. Use this option for repayment of wage advances, garnishes, child support deductions, and similar items.
Temporary Calculation-- A tax used as a temporary calculation only.

Based On Field

Use the Based on field to determines the value that this calculation starts with.

Some of the options apply to Calculation Methods that are a dollar amount:
Per Pay Period-- For a fixed deduction per pay period.
Per Gross Hour-- Based on the total hours of labor, with overtime counting extra as specified in the Wage Schedule.
Per Straight Time Hour-- Based on the total hours of labor, with no adjustment for overtime.
Per Day Worked-- Based on the number of days worked.
Per Day in Pay Period-- Based on the number of days in the pay period.

Some of the options apply to Calculation Methods that are a percentage or tax table:
Gross Wages-- The gross wages are used as a base amount.
Straight Time Wages-- The gross wages are used, minus any overtime amounts.
Adjusted Wages-- The adjusted wages choices allow you to determine the order in which Goldenseal calculates deductions.  Use one of them if this tax is based on the amount after some other tax and benefit items have been subtracted.

Subtract From Field

Some tax items are subtracted from gross wages before other tax items or benefits are calculated. You can use the Subtract From field to set up the order in which Goldenseal calculates deductions.

No Subtraction-- The amount of this Tax item has no affect on the Based On amount for other Tax Items.
Gross Wages-- The amount of this tax item will be subtracted from the gross wages after tax items that use Gross Wages have been calculated. The subtraction will reduce the base amount for all taxes that are based on one of the Adjusted Wages.
Adjusted Wages-- The amount of this tax item will be subtracted from the selected Adjusted Wage, after all tax items that use it have been calculated.  The subtraction will reduce the base amount for all taxes that are based on later Adjusted Wages.

HINT-- Goldenseal won't allow you to enter an Add To/Subtract From value that happens before the Based On value.

Rounding

Enter one of the following methods for rounding the final tax value:

Fractional Pennies-- There will be no rounding.   The value will be to the nearest hundredth of a penny.

Nearest Penny-- Round to the closest penny value.
HINT-- This is the most common rounding method.

Nearest Dime-- Round to the closest ten cent value.
Nearest Dollar-- Round to the closest dollar value.

Up To Penny-- Round to the next higher penny value.
Up To Dime-- Round to the next higher ten cent value.
Up To Dollar-- Round to the next higher dollar value.

Down To Penny-- Round to the next lower penny value.
Down To Dime-- Round to the next lower ten cent value.
Down To Dollar-- Round to the next lower dollar value.

Deduction Calculation Order

Use the Based on and Subtract From fields to handle benefits that are not taxable, taxes that subtract another tax as part of their calculation, and similar payroll complications.

For example, to set up a benefit deduction that is taxable for some tax items but not others, follow these steps:

  1. Create a Benefit Item. Enter Gross Wages into the Based On field, and Gross Wages into the Subtract From field.
  2. Open each Tax Item.  If the tax item is based on the gross amount, enter Gross Wages into the Based On field.  If it is based on the amount after the benefit deduction is subtracted, enter Adjusted Wage-- Step 1 into the Based On field.

To set up a state tax that is based on gross wages minus federal taxes, follow these steps:

  1. Open the Tax Item for federal taxes. Enter Gross Wages into the Based On and Subtract From fields.
  2. Open the Tax Item for the state tax. Enter Adjusted Wages- Step 1 into the Based On and Subtract From fields.
  3. Open the Tax Items for any other taxes. Enter Gross Wages into the Based On field, and Adjusted Wages- Step 1 into the Subtract From field.

HINT-- Most people only need to use one of the Adjusted Wages steps, but you may need to use more of them if you have a very complicated payroll setup.

TECH NOTE-- When Goldenseal calculates deductions for an employee, it loops seven times.  Doing that allows you to set up benefits and deductions that are based on an amount other than the gross wages.

  1. In the first loop it calculates all Tax Items and Benefit Items that are based on Per Pay Period, Gross Hours, Straight Time Hours, Days Worked or Days in Period, and ignores the rest.
  2. In the second loop it calculates all Tax Items and Benefit Items that are based on Gross Wages or Straight Time Wages, and then subtracts all items that have Gross Wages in their Subtract From field
  3. In the third loop it calculates all Tax Items and Benefit Items that are based on Adjusted Wages- Step 1, and then subtracts all items that have Adjusted Wages- Step 1 in their Subtract From field.
  4. In the fourth loop it calculates all Tax Items and Benefit Items that are based on Adjusted Wages- Step 2, and then subtracts all items that have Adjusted Wages- Step 2 in their Subtract From field.
  5. In the fifth loop it calculates all Tax Items and Benefit Items that are based on Adjusted Wages- Step 3, and then subtracts all items that have Adjusted Wages- Step 3 in their Subtract From field.
  6. In the sixth loop it calculates all Tax Items and Benefit Items that are based on Adjusted Wages- Step 4, and then subtracts all items that have Adjusted Wages- Step 4 in their Subtract From field.
  7. In the seventh loop it calculates all Tax Items and Benefit Items that are based on Adjusted Wages- Step 5, and then subtracts all items that have Adjusted Wages- Step 5 in their Subtract From field.

Adjustment Fields

Use the two adjustment fields to modify the tax item, after the first computation is made using the Calculation Method and Based On fields.

HINT-- You probably won't need to use the Adjustment fields for tax items that use a Tax Table, since the table has its own adjustments.

Some adjustments are simple math:

None-- No change will be made.
Plus Fixed Amount-- The entered dollar amount will be added to the original amount.
Times Constant-- The original amount will be multiplied by the entered amount.
Percentage-- The original amount will be multiplied by the entered percentage.

Some adjustments allow you to set limits on the tax:
Minimum Base Amount-- The base amount per pay period will be at least the entered amount.
Minimum Tax-- The computed tax per pay period will always be at least the entered amount.
Maximum Base Amount-- The base amount per pay period will be limited to the entered amount.
Maximum Tax-- The tax amount per pay period will be limited to the entered amount.
Annual Maximum Base--  The base amount for the year will be limited to the entered amount of wages. The tax deduction will cut off after this limit has been reached.
Annual Maximum Tax-- The total tax for the year will be limited to the entered amount. The tax deduction will cut off after that amount has been deducted.

Some adjustments use numbers which are stored in each Employee Account:
Plus Federal, State, Local, or Other Dollars-- The value in the Federal, State, Local, or Other Exemptions field in the Employee Account will be added.
Times Federal, State, Local, or Other Exemptions-- The computed value will be multiplied by the quantity in the Federal, State, Local, or Other Exemptions field in the Employee Account.
Times Disability Rate-- The computed value is multiplied by the percentage in the Disability Percent field in the Employee Account.
Times Worker Comp Rate-- The computed value is multiplied by the percentage in the Worker Comp Percent field in the Employee Account.
Times Other Rate-- The computed value is multiplied by the percentage in the Other Percent field in the Employee Account.

Base Periods

Choose the time period over which this tax table is calculated. Use the time period from the tax calculation booklet. Nearly all taxes are computed on a daily, weekly or yearly period.

HINT-- The Base Period for tax calculations does not need to be the same as the payroll period, which is set in the Wage Schedule.

The Year time period uses a 365 day year, which converts to slightly more than 52 weekly pay periods.

If you'd like an annual Tax Table to convert evenly to a weekly pay period, use either the 52 Weeks or 53 Weeks option, depending on the number of pay periods that are included in the current year.

Category Taxes

Some taxes and insurance rates use different rates for the same employee when they do different types of work. For example, in some states the worker's compensation rate is more expensive when an employee does work that is considered more dangerous.

HINT-- You may need to adjust your category system so it matches the tax rate classifications for your state or your insurance company.

To set the rates for each type of work, follow these steps:

  1. Choose Category Setup from the Costs menu, then choose Category Systems from the submenu.
  2. Click on the name of a category system, then click the Edit button.
  3. In the list of categories, type the rate for each category into the Comp Rate or Tax Rate column.
  4. f you also use subcategories, click in each category, and enter rates into each of its subcategories.

Using Tax Items

To use Tax Items, include them in a Tax Package, and assign the Tax Package to an Employee account or a Wage Schedule.

After you enter employee hours in Labor Hours records, use the Write Payroll command to create Payroll Records and paychecks.

Worker's Comp

There are three basic ways you can handle Worker's Comp insurance, depending on the way you pay for it:

  • A flat percentage or cost-per-hour for all payroll.
  • Different rates for each employee.
  • Different rates for each type of work that is done.

Flat Rate Insurance

If you pay a simple percentage of payroll, follow these steps:

  1. Choose Payroll Setup from the Costs menu, and choose Tax Items from the submenu.
  2. Click the New button.
  3. Type in a name.
  4. Use Direct Percentage as a calculation method.
  5. Enter the percentage.
  6. In the Based On field, enter the wage amount to use for a calculation base.
  7. Enter any other details about the payment.
If you pay an amount per hour or day worked, follow these steps:
  1. Choose Payroll Setup from the Costs menu, and choose Tax Items from the submenu.
  2. Click the New button.
  3. Type in a name.
  4. Use Direct Dollars as a calculation method.
  5. Enter the percentage.
  6. In the Based On field, enter the time period to use for a calculation base.
  7. Enter any other details about the payment.

Different Rates For Each Employee

If you pay different percentages for each employee, follow these steps:

  1. Choose Payroll Setup from the Costs menu, and choose Tax Items from the submenu.
  2. Click the New button.
  3. Type in a name.
  4. Use Comp Percentage as a calculation method.
  5. In the Based On field, enter the time period to use for a calculation base.
  6. Enter any other details about the payment.
  7. In each Employee Account, enter the percentage into the Worker Comp Percent field.

Different Rates For Each Type of Work

If you pay different percentages or dollar amounts for each type of work, follow these steps:

  1. Choose Payroll Setup from the Costs menu, and choose Tax Items from the submenu.
  2. Click the New button.
  3. Type in a name.
  4. Use Category Comp Rate as a calculation method.
  5. In the Based On field, enter the time period to use for a calculation base.
  6. Enter any other details about the payment.
  7. In each Category System, enter the rate for each category of work.
  8. If you use subcategories, enter a rate for each subcategory.
  9. Turn on the Comp Rate as Percent checkbox if you pay a percent of payroll. Turn it off if you pay a dollar amount.
  10. When you enter Labor Hours records, assign each item to a category.
  11. Goldenseal will use the cost category to calculate worker's comp rates.