Concept: Prior Period Tax Adjustments (USA)

When you create an ODA from the prior period tax adjustment (PPTA) calculator, Workday associates that tax adjustment result with the original pay result.

When you create a tax adjustment result for an original pay result and run the PPTA calculator on the next pay result, Workday includes only the tax authority balances from these results when calculating the PPTA on the next pay result:

Original results completed prior to the result you’re adjusting.
ODA tax adjustment results for original pay results completed prior to the result you’re adjusting.

You might need to adjust several pay results to adjust the impacted tax authorities.

Except for PPTA ODAs, Workday doesn't include any tax authority balances from results completed after the pay result you’re adjusting.

Workday includes tax authority exceptions when you process PPTAs.

If a tax authority exception is added or changed due to legislation that’s effective for the current year, Workday still applies that tax authority exception to the pay results you adjust because there’s no effective date.

When you recalculate taxes and tax authority wages for a terminated worker, Workday uses the tax authorities that are in effect on or before the termination date of the worker.

When a retroactive work tax authority goes into effect after the termination date of the worker, Workday doesn’t include it in the PPTA calculation.

If there’s a midperiod change to a company, Workday:

Creates multiple gross-to-net results.
Calculates all of the results together for payroll.

When you run the PPTA calculator on a subperiod pay result for a midperiod company change, Workday:

Calculates an ODA tax adjustment result for each subperiod.
Creates a tax adjustment result for each subperiod and company.

Unlike regular payroll calculations, PPTA calculations don’t create multiple sibling gross-to-net results when processing a PPTA from a single pay result in a pay period if there’s a retroactive midperiod change to the state tax authority. Instead, the PPTA calculator applies the new state tax authority to the entire pay period.

Example: A worker with a semimonthly pay frequency:

Lives and works in California from
01/01/2024 - 01/07/2024
.
Moves to live and work in Oregon from
01/08/2024 - 01/15/2024
.

You process payroll for the January 15pay period. You get a payroll result for the:

01/01/2024 - 01/07/2024
subperiod that calculates California wages and taxes.
01/08/2024 - 01/15/2024
subperiod that calculates Oregon wages and taxes.

You find out that the worker moved to live and work in Utah on January 4. When you use the PPTA calculator to adjust their work and resident state tax authorities, Workday:

Calculates both subperiods using Utah as the work and resident tax authority because the state tax authority is in effect within the end dates of both subperiods.
Doesn’t split the original payroll results into subperiods or combine them into a single result.