What You Need To Know About Wage Types and Tax Models For SAP HR

2004 Wellesley Information Services. All rights reserved.
What You Need to

Know About Wage
Types and Tax
Models for SAP HR
Michael Timm
Integrated Consulting Group LLC
2

What Well Cover
Understanding how Payroll uses ta models
!etting wage type taa"ility attri"utes
Connecting Ta #uthorities$ Ta Models$ Ta
Com"inations$ and Ta Types together
Processing ta%related Wage Types during Payroll
#voiding common ta model processing pit&alls
Wrap%up

What Well Cover
Wrap%up
!

'ow Payroll Uses Ta Models
Wage types are processed during payroll and may
contain ta attri"utes
_
Wages$ pre%ta "ene&its$ etc(
These wage type ta attri"utes trigger the ta
calculation which calls upon ta models
Ta models consider employee wor) location$
residence location$ unemployment location$ and
other employee master data
"

'ow Payroll Uses Ta Models *cont(+
The locations determine which ta model or
models that should "e used during ta calculation
along with the ta types that should "e calculated
The resulting data is passed to ,!I Ta-actory$
which in turn process the ta calculation and
passes the data to !#P
#

'ow payroll uses ta models *cont(+
.mployee Master /ata
_
0esidential ta area *In&otype 123+
_
Wor) ta area *In&otype 124+
_
Unemployment ta area *In&otype 125+
_
W6 ta in&ormation *In&otype 172+
_
8ther U! taes *In&otype 19:+
$

'ow Payroll Uses Ta Models *cont(+
Con&iguration
_
Wage types are assigned a ta classi&ication in Process
Class 37
_
Wage types are assigned a taa"le earning;deduction type
in Processing Class <5
_
Ta #uthorities are assigned a ta model and allowa"le
ta types
_
Ta Models are assigned ta classi&ications "y ta area
type which is association to a ta com"ination
_
Ta Com"inations are assigned allowa"le ta types
%

'ow Payroll Uses Ta Models *contd+
Payroll Processing
_
.mployee ta in&otypes and wage type processing class
37 are evaluated
_
The evaluation passes through ta models to ta
com"inations to determine allowa"le ta types
_
The data is then passed to ,!I Ta-actory
_
,!I passes "ac) to !#P taa"le wage and ta data
The result o& the input and processing is taa"le
earnings and ta
&

What Well Cover
Wrap%up
'(

!etting Wage Type Taa"ility #ttri"utes
Wage types are elements used in the payroll
schema to represent di&&erent types o& payroll
activities *e(g( wages$ deductions$ taes+
!everal taa"ility attri"utes are set &or each wage
type$ whether wages or deductions
_
The group o& attri"utes containing ta settings is called
processing classes
Ta related processing classes are used during
payroll processing and &low to the ,!I Ta-actory
inter&ace
Ta models lin) indirectly to processing classes <5
and 37
''

!etting Wage Type Taa"ility #ttri"utes *cont(+

/rill down to the Maintain
ta%related processing
classes in the IMG
'2

Processing class 37
is used to determine
the ta com"ination
!#P delivers values
availa"le in
processing class 37
Processing class 37
values may also "e
customi=ed

'

I& processing class
<5 is set to 7$ the ta
com"ination
determines the
taa"ility
I& processing class
<5 is set to 1 or 9$
the ta com"ination
is overridden

'!

Create new values &or processing class 37 when a
wage type does not &it a prede&ined value
Customer values created &or processing class 37
will need to "e added to eisting ta models
_
/epending on the ta authorities where employees
reside or wor)$ this could "e tens i& not closer to one
hundred ta models
Care&ully consider the values assigned in
processing class 37 and <5
Processing class <5 and 37 values are not
company%speci&ic
'"

What Well Cover
Wrap%up
'#

Connecting it #ll Together
Ta models drive the ta calculation process
_
Ta models identi&y how a wage type should "e
processed &or ta purposes "ased on wage type
attri"utes and employee master data
_
'owever$ the process is triggered "y wage type
attri"utes
Ta models and wage types are lin)ed indirectly
_
Ta models use ta class
_
Wage types use ta classi&ication in processing class 37
'$

Connecting it #ll Together *cont(+
,e&ore per&orming the lin)s &or ta models$ the
&ollowing steps should "e completed>
_
Ta companies should "e created
_
Ta authorities must "e allowed &or a ta company
_
.ach ta type the authority will process must have an
associated .mployee Identi&ication ?um"er
'%

/e&initions>
_
Tax types signify a specific employee or employer tax
_
Ta type 27 is withholding ta
_
Ta type 72 is unemployment ta
_
Tax authorities are the states and localities in which an
employee wor)s or resides
_
-./ is -ederal
_
80 is 8regon
'&

Tax models contain in&ormation used to calculate the
appropriate taes &or the ta authorities
_
!#P delivers ta models with an association to ta authorities
_
Customers may create new ta models
_
Ta models are lin)ed to wage types through processing
class 37
Tax combination
_
!#P delivers ta com"inations with association to ta models
_
Customers may create new ta com"inations
_
Ta com"inations contain lin)s to ta types
_
Wage type processing class <5 may "e set to e&&ect
processing
2(

!everal steps must "e per&ormed to lin) ta authorities$
ta models$ ta com"inations$ and ta types
_
Ta authorities are lin)ed to ta types
_
Ta authorities are lin)ed to a ta model
_
Ta models are lin)ed to ta com"inations
_
Ta com"inations are lin)ed to ta types
I will demo these in 0;9 6(<C( The process is similar in other versions
2'

IMG Path>
IMG >
Payroll >
Payroll: USA >
Tax >
Tax Data Maintenance

22

!#P delivers 3< ta types
?ew ta types are
delivered through LCPs

2

#ssign ta types to a ta authority
@eep in mind that ta types associated here may or not
"e processed depending on the ta com"ination used
during payroll ta processing
The entries are date delimited allowing &or ta types to
only "e processed during speci&ic time periods

2!

#ssign the ta model to the
ta authority
The entry is date delimited
allowing &or di&&erent models
&or di&&erent time periods
2"

#ssign ta models a ta
record type$ ta modi&ier$
ta class and ta
com"ination
_
Ta record types signi&ies
which ta area record should
"e used
_
Ta modi&ier is the employee
grouping
_
Ta classes are the same as
Wage type processing class
37 values
_
Ta com"inations contain the
ta types to "e processed

2#

Ta com"inations are
assigned allowa"le ta types
In addition$ the taa"ility
indicator is set
_
I& the wage type processing class
<5 is set to 7$ the ta com"ination
determines the taa"ility
_
I& the wage type processing class
<5 is set to 1 or 9$ the ta
com"ination is overridden

2$

Things to consider>
_
When creating custom ta models or ta com"inations
use the 5 range
_
!#P provides updates to delivered ta models and
new ta models
_
8nly assign ta classes reAuired "y the ta area record
_
I& Washington /C does not reAuire ta type 27
withholding &or an employee unemployment location$
do not associate the ta class to ta com"ination
containing ta type 27
2%

Things to consider>
_
Beri&y that customer%created values in wage type
processing class 37 have "een associated to ta models
_
I& the customer values are not in a ta model$ ta
calculations will not occur
_
Use transaction code !C#'0C<7274333 to access the
report DTaa"ility models;ta types "y ta authorityE
_
/isplay a list o& ta types per ta authority "ased on
ta models and ta com"inations
_
/isplay a list o& all ta authorities without a ta model
_
/isplay a list o& ta models which are used "y an
authority$ "ut are not de&ined
2&

What Well Cover
Wrap%up
(

Processing Wage Types /uring Payroll
Wage type ta attri"utes trigger the
_
Ta calculation
_
Com"ination o& wages and pre%ta deductions to &orm
wage "ases
The ta calculation trigger calls the indirect lin)
"etween Processing Class 37 and the Ta Model
associated with the employee ta location master
data
'

Processing Wage Types /uring Payroll *cont(+
The wage type amounts are com"ined "ased on the
individual wage type attri"utes
_
Wage types may &all under the regular payment type or
supplemental payment type$ etc(
_
The di&&erent payment types are processed separately
during the ta calculation due to di&&erences in treatment
I will demonstrate where to locate ta%related
processing in the payroll display log
2


Complete the payroll driver
parameter screen
Beri&y that /isplay log is
chec)ed
.ecute payroll processing

Processing Wage Types /uring Payroll *contd+
/rill down the payroll
log until the U!T#F
node is reached

!

The U!T#F node has three su" nodes used prior$
during$ and a&ter ,!I is inter&aced
Input contains
_
Gear%to%date ta results *TC0T+
_
.mployee master data *P2123$ P2124$ P2125$ P2172 P219:+
_
Processed wage types *0T$ IT+
_
0etro activity *8--!.TC8UT+
_
Baria"le assignments *B2+
Processing
_
.mployee data
_
Ta data
_
,!I inter&ace
_
Ta result
_
Cumulated ta result &or all ta types
"

8utput
_
Wage in&ormation "y ta authority$ ta authority record
type and ta type *CTFIT+
_
Ta authorities and ta types processed *0.LCIC0T+
_
.ligi"le ta types "y ta authority *T#FCL88P+
_
Wage types processed &or the wor) ta authority *TF0T+
_
Technical wages types "y ta authority *T#FCLG#0T+
_
Gear%to%date ta results *TC0T+
_
Baria"le assignments *B2+
#

The 0T ta"le
contains wage
types that will "e
used during ta
processing

$

/ata passed to ,!I is
located in the ,!I
Inter&ace node
Input ta"les were used to
create the data to "e
passed
The data may "e copied
&rom !#P and pasted in
,!Is ,atch Test utility
%

,!I returns the calculated taa"le earnings
and ta "y ta authority and ta type
Tax inc. maps to /3xx wage types
Inc. Declare maps to /6xx wage types
Tax earning maps to /7xx wage types
Tax maps to /xx wage types

&

,!I Ta results &low to the CTFIT ta"le
!ross amount maps to /3xx wage types
Taxable amount maps to /6xx wage types
"eportable amount maps to /7xx wage types
#alculated tax maps to /xx wage types

!(

When ta results are not calculating in the manner
reAuired$ veri&y the wage type attri"utes
_
/uring implementation$ a great deal o& wor) is typically
per&ormed on ta models
_
#&ter implementation$ most issues arise &rom wage type
settings and not ta models
Use the ,!I Ta-actory "atch test utility
_
/ata can "e copied &rom the ,!I Inter&ace node and
pasted to the utility
_
Tests may "e run to determine i& a "ad calculation is
"eing done in !#P or ,!I
_
/ata may changed to see how modi&ications to
con&iguration may impact results
!'

!tart with the ta"le DCumulated ta result &or all ta
typesE when trou"leshooting ta calculations
_
I& the type o& payment is made$ use the speci&ic DTa
result &or payment type E ta"le
!2

What Well Cover
Wrap%up
!

#voiding Common Pit&alls
When creating custom values &or wage type
processing class 37$ remem"er to add the value to
the ta models
_
I& a wage type is assigned a new processing class 37
value$ "ut the value has not "een added as a
classi&ication to a ta model$ the wage type will have
taes calculated
_
/eletion o& a processing class 37 value should "e
&ollowed "y the removal o& the classi&ication assignment
to ta models
_
This step is not reAuired$ "ut will )eep the ta model
ta"le cleaner
_
#lso$ i& the value is ever added "ac)$ the ta will not
"e inadvertently calculated
!!

#voiding Common Pit&alls *cont(+
#ssign new processing class 37 values to all ta
models$ regardless i& they are currently used or not
_
When a new ta authority is used in the &uture$
con&iguration &or the process class 37 value will already
"e done and not overloo)ed
Use a naming convention &or processing class 37
values that easily identi&ies how a wage type should
"e processed
_
Use pre%ta "ene&its instead o& health "ene&it or wage
type xxxx
!"

Create custom ta models and ta com"inations in
the 52 num"er range
_
!#P sends new ta models and updated ta models in
lower rangesHavoid a collision
Beri&y ta types associated to a ta authority are
also associated to the ta com"inations in the ta
authority ta model
_
Ta types associated to a ta authority will not process
unless a ta com"ination contains the ta types also
_
#n eample would "e i& ta authority -./ is associated
with ta type :3$ "ut the -./ ta model does not contain
a ta com"ination associated to ta type :3
!#

Ta types associated with a ta com"ination will not
cause that ta to calculate i& the ta authority is not
associated with the ta type
_
#n eample is i& a ta com"ination is associated with ta
type 62$ "ut ta authority -./ is not( Ta type 62 will "e
disregarded during ta calculation &or ta authority -./
!$

Customi=ing ta models and ta com"inations
should entail care&ul consideration and veri&ication
that it only impacts the ta authority reAuired
_
When in dou"t$ create a new ta model or ta com"ination
Use date delimiting when creating or modi&ying a ta
model or ta com"ination
_
Ta authorities will may add a new ta or remove an
eisting ta
_
Ta authorities may waive or add a ta &or only a speci&ied
period o& time
!%

/o not assume a "ad ta calculation is due to
incorrect calculation "y ,!I
_
Wage type attri"utes are typically to "lame &or incorrect
calculations
!&

What Well Cover
Wrap%up
"(

0esources
8!! ?ote 176394
_
/i&&iculties in con&iguring 6(<,;C taa"ility model
8!! ?ote :97777
_
?egative taa"les &unctionality in U(!( Ta
http://service.sap.com/!USA/
_
/ocumentation HI User guides HI ,!I Ta -actory
_
/ocumentation HI User guides HI ?egative Taa"les
User Guide
http://help.sap.com/
_
!#P help we"site accessi"le via the internet
"'

!even @ey Points to Ta)e 'ome
Wage types trigger the ta calculation and the use o& ta models
Ta models drive the ta calculation process
Wage type processing class 37 indirectly lin)s to a ta model
classi&ication
Transaction code !C#'0C<7274333 accesses the report
DTaa"ility models;ta types "y ta authorityE
/uring payroll processing ta is processed using the U!T#F node
The ,!I Ta-actory "atch test utility is handy when
trou"leshooting ta calculations
Creating a new value &or processing class 37 reAuires the value to
"e associated with ta models to calculate ta
"2

Gour TurnJ

How to Contact Me:
Michael Timm
mtimm@icgllc.net

What You Need To Know About Wage Types and Tax Models For SAP HR

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