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Administrator Guide
Last Updated: 2025-09-19
Define Tax Authority Exceptions from Pay Component Groups (USA)

Define Tax Authority Exceptions from Pay Component Groups (USA)

Security:
Set Up: Payroll (Calculations - Payroll Specific)
 domain in the Core Payroll functional area.
You can set up a pay component group (PCG) to either exclude or include pay components for a tax authority.
  1. Access the
    Maintain Tax Authority Exceptions Pay Component Groups
     task.
  2. Select the
    Pay Component Group
     that requires exceptions.
  3. Select a date from the
    Update Existing Effective Date
    or
    Add New Effective Date
     prompt.
    When you add an effective date for an exception for taxes or withholding orders, Workday considers the exception snapshot that’s effective as of the payment date or payment date override while processing payroll calculations.
    For Flat Sum Bonus, Workday considers the snapshot that's effective as of the subperiod or period end dates while processing calculations.
  4. On the
    Effective Dated Details
     tab, in the
    Exceptions for Taxes
     section, select the
    Payroll Tax Authority
    .
    1. From the
      Exclude Pay Component(s)
       prompt, select the pay component that should be excluded from the PCG.
    2. From the
      Include Pay Component(s)
       prompt, select the pay component that should be included in the PCG
  5. In the
    Exceptions for Withholding Orders
     section, specify exceptions to the disposable earnings calculation for withholding orders.
    1. From the
      Payroll Tax Authority
       prompt, select 1 or more tax authorities that calculate disposable earnings differently.
    2. From the
      Withholding Order Type
       prompt, select 1 or more types of withholding orders.
    3. When the pay component:
      • Is part of the group but the tax authority treatment of it doesn't apply, select it from the
        Exclude Pay Component(s)
         prompt.
      • Isn't part of the group but the tax authority treatment of it does apply, select it from the
        Include Pay Component(s)
         prompt.
Workday makes the PCG exceptions that you configure. You can access the
View Pay Component Group
 report to verify the
Exceptions
 tab in the
Effective Dated Details
 .
Example
The
State Withholding Taxable Reduction
 PCG reduces state taxable income for 401(k) contributions in all states except Pennsylvania, so the pay component
401(k) [USA]
 should be excluded for the Pennsylvania tax authority from the
State Withholding Taxable Reduction
 PCG.
Exceptions for taxes for the
State Withholding Taxable Reduction
 PCG:
Payroll Tax Authority
Exclude Pay Component(s)
Include Pay Component(s)
Pennsylvania
401(k) [USA]
With this configuration, Workday excludes the
401(k) [USA]
pay component from the
State Withholding Taxable Reduction
 PCG when processing payroll for Pennsylvania.