Deduction Code Maintenance

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Deduction Code

Enter the deduction code representing the deduction type you want to add or maintain, or click the Lookup button to list all deduction codes.

Deduction code 000001 must be used for Tips Reported. This is a permanent record and cannot be deleted. If your payroll requires tip reporting, see Allocating Tips.

Deduction code FB is a permanent record and cannot be deleted. For more information, see Fringe Benefits.

When an earnings code with a fringe earnings type is entered in Payroll Data Entry, an offsetting line with an FB deduction code is created automatically to deduct the line amount from the net check amount. The fringe benefit information will be printed in the box labeled "Benefits included in Box 1" on your W-2 forms.

 

Description

Type a description for the deduction (credit union, insurance, etc.).

 

Deduction Type

Select the deduction type to use for this deduction code.

Employer contributions are entered as deductions in this task and are entered in Payroll Data Entry using the normal deduction procedures. The contribution amount, however, is not subtracted from the employee's check. Instead, the amount is debited to the contribution expense account and credited to the deduction accrual account.

The amount deducted from either the pension plan or cafeteria plan can reduce the employee's taxable wages based on the tax information specified in this field.

The deduction type cannot be changed if the deduction code has been used to process payroll and the associated history is still on file.

 

Calculation Method

Select the calculation method to indicate how this deduction should be calculated.

• Select Fixed Amount to enter a flat dollar amount. If you select this method, enter the dollar amount in the Standard Amount/Rate field.

• Select Percentage of Gross to calculate a percentage of gross wages. Enter the percentage rate in the Standard Amount/Rate field.

   Example

  The employee earns 500.00 in gross wages. You enter 5.00 in the Standard Amount/Rate field. The deduction will calculate as follows:

  .05 * 500.00 = 25.00

• Select Based on Reg Hrs Worked to calculate a deduction amount by multiplying an amount by the number of regular hours worked. Enter the amount in the Standard Amount/Rate field.

   Example

  The employee works 40 regular hours, and you enter 2.00 in the Standard Amount/Rate field. The deduction will calculate as follows:

  2 * 40 = 80.00

• Select Based on Total Hrs Worked to calculate a deduction amount by multiplying an amount by the total number of hours, including regular, overtime, sick, vacation, and so forth. Enter the amount in the Standard Amount/Rate field.

   Example

  The employee worked 32 regular hours and has 8 sick hours and 40 vacation hours. You enter .75 in the Standard Amount/Rate field. The deduction will calculate as follows:

  (32 + 8 + 40) * .75 = 60

• Select Percentage of Net Wages to calculate the percentage of net wages (gross wages minus all tax deductions). If you select this method, enter the percentage rate in the Standard Amount/Rate field. This method is useful for calculating garnishment deductions. This method is not available for pension plan and cafeteria plan deduction types.

  Note When a deduction calculated using this method causes the check amount to be negative, the deduction amount will be adjusted so that the check amount is zero.

   Example

  The employee earns 300.00 in net wages. You enter 5.00 in the Standard Amount/Rate field. The deduction will calculate as follows:

  .05 * 300 = 15

• Select Equal to Earnings Code(s) to calculate a deduction amount equal to the earnings amount for up to three specified earnings codes. This method should be used only if you do not want to include certain earnings amounts on the paycheck. If you select this method, enter up to three earnings codes in the Equal to Earnings Code fields.

   Example

  Earnings code 09 (Meals) is used to record employee meal earnings for tax calculation purposes, and you do not want the meal amounts to add into the employee's net pay amount. Automatically deduct the meal allowance by establishing a deduction using this calculation method, and enter 09 in the Equal to Earnings Code field.

• Select Based on Reg + OT Hrs to calculate a deduction amount by multiplying an amount by the number of regular hours worked plus the number of overtime hours worked. Enter the amount in the Standard Amount/Rate field.

   Example

  The employee works 40 regular hours and 10 overtime hours, and you enter 2.00 in the Standard Amount/Rate field. The deduction will calculate as follows:

  (40 + 10) * 2 = 100.00

• Select Based on Paid Hrs to calculate a deduction amount by multiplying the number of hours by the pay rate multiplier entered in Earnings Code Maintenance and then multiplying the total by the amount entered in the Standard Amount/Rate field.

   Example

  The employee has 40 regular hours with a multiplier of 1, 10 overtime hours with a multiplier of 1.5, and 1 double-time hour with a multiplier of 2. You enter 3 in the Standard Amount/Rate field. The deduction will calculate as follows:

  ((40 * 1) + (10 * 1.5) + (1 * 2)) * 3 = 171.00

• Select Percentage of Total Hrs to calculate a deduction amount by multiplying a percentage rate by pay rate 1 entered in Employee Maintenance and then multiplying that amount by the total hours worked. Enter the percentage rate in the Standard Amount/Rate field.

   Example

  The employee has 46 total hours with a pay rate 1 of 25.00. You enter 5.00 in the Standard Amount/Rate field. The deduction will calculate as follows:

  (.05 * 25) * 46 = 57.50

• Select Based on Pay Rate to calculate a deduction amount by multiplying an amount by one of the employee's pay rates. Enter the amount in the Standard Amount/Rate field, and select the pay rate in the Employee Pay Rate field.

   Example

  The employee's pay rate 2 is 10.00. You select Pay Rate 2 in the Employee Pay Rate field and enter 2.50 in the Standard Amount/Rate field. The deduction will calculate as follows:

  2.5 * 10.00 = 25.00

• Select Percentage of Deduction to calculate a deduction amount by multiplying a percentage rate by another deduction amount. Enter the percentage rate in the Standard Amount/Rate field, and select the deduction code to be used in the calculation in the Deduction Code to Use field. This method is available only if Employer Contribution is selected in the Deduction Type field.

   Example

  The employee has a deduction amount of $100 using deduction code 06 in Payroll Data Entry. You enter 5.00 in the Standard Amount/Rate field and enter deduction code 06 in the Deduction Code to Use field. The deduction will calculate as follows:

  .05 * 100 = 5.00

• Select Percentage of Disposable Wages to calculate a deduction that is the minimum of either the percentage of disposable wages or the disposable wages greater than the maximum income multiplier. Enter the percentage rate in the Standard Amount/Rate field, enter a dollar amount at the Standard Limit field, and enter a multiplier at the Maximum Income Multiplier field. If this calculation method is selected, the Deductions button is available, and you can select which non-employer contribution deductions to include in the calculation of disposable wages.

   Example

  The employee earns $500.00 in gross wages, minimum hourly wage is $7.25 in Payroll Options, a $75.00 health insurance deduction is selected in Deduction Codes for Disposable Wage Calculation, and taxes are $125.00. You enter 25.00 at the Standard Amount/Rate field and enter 8,000.00 at the Standard Limit field. At the Maximum Income Multiplier field, you enter 30.

  Disposable wages are: 500 - 75 - 125 = 300

  The deduction will be calculated as the minimum of either:

  • The percentage of disposable wages: 300 * .25 = 75.00
    
    -OR-

  • Disposable wages greater than the maximum income multiplier: 300 - (7.25 * 30) = 82.50

  The deduction amount will be calculated as $75.00 since this is the minimum amount.

When you print the Deduction Code Listing, the following codes will print on the listing to show which calculation method is selected for each deduction:

Calculation Method	Code
Fixed Amount	A
Percentage of Gross	P
Based on Reg Hrs Worked	R
Based on Total Hrs Worked	H
Percent of Net Wages	N
Equal to Earnings Code(s )	E
Based on Reg + OT Hrs	S
Based on Paid Hrs	I
Percentage of Total Hrs	T
Based on Pay Rate	Y
Percentage of Deduction	D
Percentage of Disposable Wages	C

 

Standard Amount/Rate

If there is a standard deduction amount or rate, use the following table to determine the amount or rate to be entered based on your selection in the Calculation Method field.

Calculation Method	Standard Amount/Rate
Fixed Amount	Enter the fixed dollar amount.
Percentage of Gross	Enter the percentage of gross wages (1.000 = 1%, 1.500 = 1.5%, etc.).
Based on Reg Hrs Worked	Enter the amount to be multiplied by the number of regular hours.
Based on Total Hrs Worked	Enter the amount to be multiplied by the total number of hours worked.
Percent of Net Wages	Enter the percentage of net wages (1.000 = 1%, 1.500 = 1.5%, etc.).
Equal to Earnings Code(s )	This field is not available if this calculation method was selected.
Based on Reg + OT Hrs	Enter the amount to be multiplied by the total of regular and overtime hours.
Based on Paid Hrs	Enter the amount to be multiplied by the product of the total hours worked and the pay-rate multiplier.
Percentage of Total Hrs	Enter the percentage rate to be multiplied by the total hours (1.000 = 1%, 1.500 = 1.5%, etc.).
Based on Pay Rate	Enter the amount to be multiplied by the selected pay rate.
Percentage of Deduction	Enter the percentage rate to be multiplied by the deduction amount (1.000 = 1%, 1.500 = 1.5%, etc.).
Percentage of Disposable Wages	Enter the percentage of disposable wages (1.000 = 1%, 1.500 = 1.5%, etc.).

If there is no standard deduction, enter 0. The amount (or rate) entered establishes the default deduction amount displayed when this deduction code is entered in an employee record or in Payroll Data Entry. The default amount can be changed at that time. This field is useful if all (or the majority) of employees have the same amount deducted for this deduction type (for example, insurance).

 

Standard Limit

Type a standard deduction limit, in terms of the dollar amount, for all employee records using this deduction code. The limit entered establishes the default deduction goal displayed when this deduction is entered in an employee record. Entering an amount of 0.00 assumes no dollar limit.

 

Apply to W-2 Box

Select the box on the W-2 form that applies to this deduction. For more information, refer to the W-2 form instructions provided by the IRS.

 

Box 12 Code

Type the Box 12 code that applies to this deduction. Elective deferred compensation and other reported contributions must be printed in Box 12 on W-2 forms by using the one or two-character code defined by the IRS for this deduction. For more information about current Box 12 codes, refer to the W-2 form instructions provided by the IRS.

 

Deduction Code to Use

Enter the deduction code to use for the Percentage of Deduction calculation method, or click the Lookup button to list all deduction codes. This field is available only if Percentage of Deduction is selected in the Calculation Method field.

Note You cannot select a deduction code that uses the Percentage of Net Wages calculation method.

 

Employee Pay Rate

Select which pay rate to use for this deduction code. This field is available only if Based on Pay Rate is selected at the Calculation Method field.

 

Maximum Income Multiplier

Enter the maximum income multiplier to use for the Percentage of Disposable Wages calculation method. This field is available only if Percentage of Disposable Wages is selected in the Calculation Method field.

 

Reset Balance at Year End

Select this check box to retain employee deduction records, regardless of whether or not the limit is reached for the deduction code. In the Add Deduction window accessed in Employee Maintenance, the deduction balance is reset to the amount in the Goal field during year-end processing.

Clear this check box if you do not want to reset the deduction balance at year end. This field is available for all deduction types that have a limit entered in the Standard Limit field.

 

Certified Payroll Benefit Type

Select an option to specify how this deduction code is handled on the Certified Payroll Worksheet.

• Select No to exclude this deduction code from the worksheet.
• Select one of the deduction categories to include this deduction in that category on the worksheet.

This field is available if the Job Cost module is integrated with Payroll and the TimeCard module is registered.

 

Equal to Earnings Code

Enter up to three earnings codes for this deduction code, or click the Lookup button to list all earnings codes. These fields are available only if Equal to Earnings Code(s) is selected in the Calculation Method field.

 

Frequency of Deduction

Select the check box assigned to the pay period(s) of each month in which this deduction is to be applied automatically. For example, if a deduction is taken automatically every pay period, select the Every Pay Period check box. If the deduction is taken only when the deduction period specified in Payroll Data Entry is 1 or 3, select the Pay Period 1 and Pay Period 3 check boxes. If the deduction is always entered manually during Payroll Data Entry, clear all check boxes.

The pay period(s) selected are matched with the period specified in Payroll Data Entry, and deduction entries are automatically generated for employees with this deduction code. A deduction can be entered manually in Payroll Data Entry for periods not selected for automatic deduction.

 

Automatically Apply Deduction to Earnings Code

Enter the earnings code that will be increased by the amount equal to the deduction amount when this deduction is applied. Click the Lookup button to list all earnings codes. The earnings code must have Fixed Amount selected in the Method of Entry field in Earnings Code Maintenance. Leave this field blank if you do not want any automatic earnings applied.

To apply a deduction amount to an earnings code, the deduction code must be set up as an automatic deduction in the employee record if you use the Automatic Payment Entry feature. If you enter payroll data manually, the Auto Ded check box must be selected inPayroll Data Entry.

This field is not available if Equal to Earnings Code(s) is selected in the Calculation Method field.

 Example

If you pay a cash advance for meals of $15.00 per pay period, you can set up a matching earnings code and deduction code for meal allowances. You can then enter the earnings code designated as meal allowance in this field. Each time an employee has this deduction taken for meals, there will be an automatic addition of an equal amount in the form of earnings. This enables you to have applicable taxes deducted from the earnings amount and reflected on the employee paycheck.

 

Deduction Accrual Account

Enter the general ledger account number for posting amounts for this deduction code, or click the Lookup button to list all general ledger accounts.

If the account number is longer than the field, use the left and right arrow keys to view the entire account number.

Accounts can be created in this field if the appropriate settings are defined in the Auto Create when all Segments are Valid field in General Ledger Options.

 

Contribution Expense Account

Enter the general ledger contribution expense account number from the chart of accounts, or click the Lookup button to list all general ledger account numbers. This field is available only if Employer Contribution is selected in the Deduction Type field.

If the account number is longer than the field, use the left and right arrow keys to view the entire account number.

Accounts can be created in this field if the appropriate settings are defined in the Auto Create when all Segments are Valid field in General Ledger Options.

 

Tax Rule

Enter a tax rule to determine which taxes the selected deduction code will reduce. Click the Lookup button to view the list of tax rules, which are maintained in the tax calculation engine. For more information, see Tax Rules for Deduction Codes.

This field is available only for pension and cafeteria plan deductions.