How to set up a local tax ?

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    Description
     
    • How to set up an LIT formula
    • How to set up a local income tax
    • How to create a local income tax
    • How to set up a school tax
    • How to change local tax to a different city
    Disclaimer
     
    Support
    Sage Customer Support does not provide assistance for issues related to third party products or enhancements, hardware, report customizations, state or federal tax-related questions, or specific accounting questions. Please contact your Sage business partner, network administrator, or accountant for assistance. Please review this document for additional information on the scope of Sage Customer Support Services.
    Resolution
     

    Section I: Set Employee Defaults

    1. Select MaintainDefault InformationEmployees
    2. Select the Employee Fields tab
    3. On the first available line, enter Local_Tax for Name
      Note: If the local tax field is already listed then proceed to the next section
    4. Select a G/L account (normally a liability account)
    5. Check Calc; in the Formula field, enter **LIT
    6. Select the Adjust button
    7. Check Use next to Gross under Employee Fields, as well as any taxable payroll addition fields (tips, etc.) or pre-tax deduction fields (insurance, retirement plans, etc.)
    8. Select OK, then select OK again

    Section II: Basic Formula
    Note:
     Sage does have some local income tax (LIT) formulas that it provides with Sage Payroll.  If the formula is listed in Sage-Maintained then we encourage to use this formula instead of creating one.  To check and see if Sage provides the formula Select FilePayroll FormulasSage-Maintained.  If the formula is listed in the drop down then take note of the Locality Name and proceed to Section IV.  Example: MOLIT 16  with Locality Name = St. Loui

    Use these steps if the tax is a basic percentage of gross pay, with no yearly limit or allowances; skip to Section III if your tax does include these options.

    1. Select FilePayroll FormulasUser-Maintained
    2. For Formula ID enter XXLIT, with XX being the 2-letter state abbreviation (i.e., GALIT)
    3. For Name, enter XXLIT YY, with XX being the state abbreviation and YY being the 2-digit payroll year (i.e, GALIT 13)
    4. Set Effect on Gross Pay to Subtracts from Gross
    5. Set Filing Status to All
    6. For How do you classify this formula? select Tax
    7. For Tax Agency select Locality
    8. Set All localities?:
      • If the tax applies to all localities, select Yes and skip to Step 10
      • If each locality has its own rate, select No and continue to the next step
    9. Enter a Locality Name of up to 8 characters; this must match exactly what is entered on the employee records’ Withholding Info tab for Locality on the Local line
    10. For Formula, enter the following:

      PERCENT=X.XX;
      ANSWER=-ADJUSTED_GROSS*PERCENT%

      replacing X.XX with the tax rate

    11. Select Save
    12. If you have multiple localities, change the Formula ID slightly (for example, GALITa), and change the Locality Name and Percent to the name and rate for each locality, then click Save
    13. Once all local tax formulas have been created, close the User-Maintained Formulas window

    Section III: Advanced Formula
    Use these steps if your local tax needs to use allowances or limits.

    1. Select FilePayroll FormulasUser-Maintained Formulas
    2. For Formula ID enter XXLIT, with XX being the 2-letter state abbreviation (i.e., GALIT)
    3. For Name, enter XXLIT YY, with XX being the state abbreviation and YY being the 2-digit payroll year (i.e, GALIT 13)
    4. Set Effect on Gross Pay to Subtracts from Gross
    5. Set Filing Status to All
    6. For How do you classify this formula? select Tax
    7. For Tax Agency select Locality
    8. Set All localities?:
    9. If the tax applies to all localities, select Yes and skip to Step 9Note: If each locality has its own rate, select No and continue to the next step
    10. Enter a Locality Name of up to 8 characters; this must match exactly what is entered on the employee records’ Withholding Info tab for Locality on the Local line
    11. For Formula, enter the following:

      E=0.00; “E is Exemption Amount per Local Allowance”
      D=0.00; “D is the Allowance Amount per Dependent”
      M=0.00; “Maximum Tax (0 if no maximum)”
      PERCENT=0.00000; “The value user entered for Locality %”
      A=PRORATE((ANNUAL(ADJUSTED_GROSS)-(E*EMP_LOCAL_ALLOWANCES)-(D*EMP_LOCAL_NUMBER))*PERCENT%);
      ANSWER=-IF(M=0,A,IF((ABS(YTD(Local_Tax)-Local_Tax)+A)>M,M-ABS(YTD(Local_Tax)-Local_Tax),A))

      replacing X.XX with the tax rate

    12. Select Save
    13. If you have multiple localities, change the Formula ID slightly (for example, GALITa), and change the Locality Name and Percent to the name and rate for each locality, then click Save
    14. Once all local tax formulas have been created, close the User-Maintained Formulas window

    Section IV: Add to Tax Forms

    1. Select MaintainPayrollPayroll Settings
    2. Select Taxes, then Assign Tax Fields
    3. Select W-2 Fields
    4. For Local Income Tax line, select Local_Tax
    5. Select OK, then Finish

    Section V: Set Employees to Use the Local Tax

    1. Select MaintainEmployees/Sales Reps and select an employee
    2. Select Withholding Info
    3. On Local line, in the State/Locality field, select the employee’s locality from the drop-down list; if the local tax applies to all localities, type the locality name
    4. Select Save
    5. Repeat for each employee
    6. On any employees that do not pay local income tax: Select the Employee Fields tab
    7. Uncheck Use Defaults on the Local_Tax line
    8. Uncheck Calc
    9. Select Save

    Note: If there is more than 1 local tax that may apply to one employee, but the taxes needed to be reported separately (for example, a city income tax and a school district tax), create two payroll fields, 1 for each, and give the formulas distinct Names; for example, name the city income tax GALIT and the school district tax Fulton (the school tax would be set to apply to all localities)

    Source: Sage Community forums.

    Disclaimer: Sage Accounting Solution is an independent provider of Sage Related services and is not affiliated with Sage.

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    Support Team Answered on December 14, 2017.
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