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Administrator Guide
Last Updated: 2023-06-23
Concept: Multi-Jurisdiction Tax Allocations (USA)

Concept: Multi-Jurisdiction Tax Allocations (USA)

Workday helps to enable payroll processing for a mobile workforce through:
  • Ongoing Multiple Work Jurisdictions (OMWJ)
  • Tax Location Mapping (TLM)
  • Payroll Input with Tax Authority worktags
These tax allocation methods work with or without the use of Workday Time Tracking.
Ongoing Multiple Work Jurisdictions
You can use OMWJ when your mobile employees regularly:
  • Work in the same multiple states, cities, or counties on an ongoing basis.
  • Don't report hours separately for each jurisdiction.
You can set Workday up to calculate and withhold taxes for each jurisdiction based on percentages you specify. You set up OMWJ at the company and worker level.
Example: As a sales representative, each pay period Sam works:
  • 30% in Virginia.
  • 25% in Maryland.
  • 45% in Pennsylvania.
The payroll administrator sets up these allocation percentages on his tax elections. Workday calculates taxes based on the specified percentages.
Tax Location Mapping
You can use TLM when mobile employees work in unpredictable tax jurisdictions and percentages of time. You can set up Workday to calculate and withhold taxes for each jurisdiction based on tax location worktags you specify. TLM requires:
  • The mapped location to be designated as a
    Business Site
     in Workday.
  • Time entry (either manually or through Workday Time Tracking) that is associated with a tax location worktag.
Example: As a sales consultant, Susan has multiple customers in New York, New Jersey, and Connecticut. In 1 month she works 2 weeks in New York, 1 week in New Jersey, and 1 week in Connecticut. The next month, she works 2 weeks in Connecticut and 2 weeks in New Jersey. The payroll administrator sets up tax location mapping. Payroll input entered for Susan that includes the location worktags calculates all applicable state, city, and local taxes.
Pretax Deduction Allocation
You have the option to enable pretax deduction allocations using any of these options:
  • OMWJ.
  • TLM.
  • Payroll input with tax authority worktags.
  • Any combination of these methods.
You set up pretax deduction allocations at the company level. Select the
Allow Pre-Tax Deduction Allocation
 check box on the
Edit Company Federal US Tax Reporting
 task.
To exclude an earning from the pretax deduction allocation calculation, add it to the
Pre-Tax Deduction Allocation Exclusion
 pay component group. Example: You want to exclude a non cash-taxable earning that's used in the calculation of another earning.
You can't set up flexible deductions for pretax deductions if you have also enabled Ongoing Multiple Work Jurisdictions (OMWJ).
Exceptions for State Unemployment Insurance
Regardless of setup, Workday doesn't apply percentage splits to State Unemployment Insurance (SUI) taxable and subject wages. Workday always applies SUI and other taxes based on SUI to the primary work state.
Priority of Tax Allocation
You can use a combination of OMWJ, TLM, and payroll input with worktags. Worktags, either through TLM or payroll input, take precedent over OMWJ and Workday will only apply the worktags. Workday applies OMWJ to the default wages with no worktags and splits according to the specified percentages.
Example: You set up OMWJ tax allocation for a worker. You add payroll input with worktags for that worker. Workday applies OMWJ to the default wages, and applies the worktag split to the pay input wages.
Pay Components Workday Automatically Splits
When configured, Workday splits all earnings and deductions that belong to these pay component groups:
  • Local Withholding Taxable (Do Not Withhold Taxes)
  • Local Withholding Taxable Reduction
  • Local Withholding Taxable (Withhold Taxes)
  • State Withholding Taxable (Do Not Withhold Taxes)
  • State Withholding Taxable Reduction
  • State Withholding Taxable (Withhold Taxes)
These pay component groups include taxable earnings, imputed earnings, and pretax deductions. Within these earnings and deductions, Workday splits pay component related calculations (PCRCs) that use these Workday-owned related calculations:
  • Hours Prorated
  • Hours unprorated
  • Original amount
  • Time off paid (units)
  • Time off total (units)
  • Time off unpaid (units)
Pay Components Workday Automatically Resolves
When configured on the company, these local other deductions resolve for workers that work in jurisdictions other than their primary work state in the same period.
Deductions
Always Resolve For
NM: New Mexico Workers Compensation Administration Fund [USA]
NM: New Mexico Workers Compensation Administration Fund - Employer Paid [USA]
New Mexico State Hours
WA: Washington Supplemental Pension Fund [USA]
WA: Washington Supplemental Pension Fund (ER) [USA]
Position Based:
WA: Washington Stay at Work Program [USA]
WA: Washington Stay at Work Program (ER) [USA]
WA: Washington Medical Aid Fund (Effective Jan 2017) [USA]
WA: Washington Medical Aid Fund (ER) (Effective Jan 2017) [USA]
WA: Washington Industrial Insurance (Accident) Fund (ER) [USA]
Washington State Hours
Oregon Workers Benefit Fund – Employer Paid [USA]
Oregon Workers Benefit Fund [USA]
Oregon State Hours
Rounding with Ongoing Multiple Work Jurisdictions
Workday applies rounding when you select a proration option on a pay component. Workday rounds up the second decimal place to the total payroll input amount. Example: For a medical deduction with payroll input of 151.55 USD, Workday applies a rounding adjustment of - 0.02:
State
Calculation (USD)
Result (USD)
Round Up (USD)
CA
151.55 * 43%
65.1665
65.17
CO
151.55 * 31%
46.9805
46.98
UT
151.55 * 26%
39.403
39.41 - 0.02 = 39.39
Total Payroll Input
151.55
State Tax Reciprocity
Many states have reciprocity agreements for employees that live in 1 state and work in another. These agreements sometimes:
  • Exempt employees from taxes in 1 state under specific conditions.
  • Specify how to calculate the taxes.
Workday references these agreements when processing payroll to correctly tax employees. You can review the rules Workday follows on the
View Payroll Multistate Withholding Rules
 report.