Zeal's tax architecture
In payroll, there are multiple ways of designing a tax engine based on the frameworks and laws outlined. You’ll find details on some specific architecture decisions we have made that could affect the way you choose to build your system and design user interfaces.
Supplemental wages can be defined as wage payments to an employee that aren't regular wages.
They include, but aren't limited to:
- Back pay
- Overtime pay
- Payments for accumulated sick leave
- Payments for nondeductible moving expenses
- Reported tips
- Retroactive pay increases
- Severance pay
It’s also important to note that employers have the option to treat overtime pay and tips as regular wages instead of supplemental wages.
How Zeal taxes supplemental wages
Supplemental wages on their own independent check
Supplemental wages (such as a bonus) are placed in an earning component in an independent check with no other earning components.
Nick resides in CA, and receives an $80 bonus in an independent check on an off-cycle payroll run. Nick’s payroll for this bonus would be calculated with the supplemental rate.
Supplemental wages on checks with other earning components
Supplemental wages are entered in a check that is combined with other earning components, such as regular wages.
Alex resides in CA and receives a single paycheck that has an hourly amount ($80) and a bonus amount ($20). Zeal will tax the hourly at the general income rate outlined for regular wages, and the $20 at the supplemental rate.
Supplemental wages not classified as supplemental
Supplemental wages that are not correctly classified as supplemental wages will be taxed as regular wages.
Jack resides in CA. His employer totals his hourly rate ($90) with his bonus ($10) and enters his earnings as a flat amount ($100). Since Jack’s Employer combined a regular wage earning component with a bonus, Jack’s whole earnings will be taxed as regular wages.
Deductions and benefits
Zeal helps calculate deductions and benefits in a few different ways, primarily using something called a deduction template. For more on how to configure deduction templates, see Deduction template object definition.
Percentage deductions vs. flat deductions
There are two ways for you to design deductions and benefits:
- Percentage-based deductions—Zeal calculates the total amount of deductions based on the percentage of payroll and deducts that respective amount.
- Zeal will round up to the nearest penny if the nearest fraction is above .5.
- Flat deductions—Zeal simply deducts the flat amount instructed.
Deductions Zeal supports
Zeal will calculate the percent based on the regular wages an employee earns. This model assumes that:
- An employee's normal wages are regular.
- An employee will not wish to have deductions apply for bonus amounts of work performed, since it would not be predicted in their normal earning calculations.
An employee earns $80 in regular wages, and $20 in a bonus with a 5% 401K deduction. The 401K deduction will only apply for the regular wages ($80), and not their bonus ($20).
Combining percentage-based deductions with flat deductions
If you wish to deduct from bonus wages, you can combine a percentage-based deduction and a flat deduction to cover the full amount of wages.
An employee earns $80 in regular wages, and $20 in a bonus with a 5% 401k deduction. They have also requested that their bonus gets a 5% deduction for their 401k deduction. The 5% 401K deduction will apply to regular wages ($80), and a flat deduction for $1.00 should be applied for their bonus ($20).
Frequently Asked Questions
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