Payroll Tax balance definitions in Fusion Payroll – Useful Information
In Payroll, there are various Tax definitions. People who are new to the US payroll often get confused about the definition of each of these terms. So here is a brief summary of the various Payroll Tax balance definitions in Fusion Payroll.
- “Gross” is the gross earnings to which the tax applies in the given jurisdiction.
- “Subject Earnings” is the portion of gross subject to the tax. This value is equal to Subject Withholdable + Subject Not Withholdable.
- “Subject Withholdable” is the portion of gross earnings subject to the tax and withholdable.
- “Subject Not Withholdable” is the portion of the gross earnings that are subject to the tax but not withholdable. This figure is applicable only to income taxes.
- “Exempt” is the portion of gross earnings not subject to the tax (that is Exempt + Subject Withholdable + Subject Not Withholdable = Gross.)
- “401k/403b/457/125 Dependent Care Reductions” refers to the 401k/403b/457/125 Dependent Care amounts applicable as pretax reductions on the gross for the given tax. A pretax reduction is the amount of the pretax deduction that is allowed to reduce gross according to taxability rules.
- Section 125 refers to only Health Care 125.
- Remember that “reductions” does not mean “deductions.”
- “Reduced Subject Withholdable” is the Subject Withholdable less the pretax reductions. This value is the final amount on which tax is calculated for income taxes.
- For limit taxes only, “excess” is the amount of the subject over the tax limit.
- For limit taxes only, “taxable” is the Reduced Subj Witholdable – Excess. This value is the final amount to which tax is applied for limit taxes.Note: Notice the limitations on which tax balances are valid for the type of tax, limit, or income. In the case of no tax rules (as in the case of a state with no income tax), the above tax balances are meaningless, and thus should all be zero.
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