Setup Considerations: Payroll Tax Setup (USA)

What It Is

Workday provides tax data and related tasks and calculations that enable you to manage federal, state, and local taxes for payroll. You enter the company and worker-specific tax data.

Workday also provides a Payroll Compliance Updates
dashboard to give you insight into updates that might affect you and your employees.

Business Benefits

Workday Payroll maintains tax updates by tax authority and type. Workday Payroll enables you to:

Easily meet the legal requirements for deducting and reporting worker pay and statutory contributions.

Increase efficiency by streamlining the process for managing and submitting tax reports.

Save time by automatically calculating federal, state, and local taxes, including up-to-date tax rates, wage and payment limits, and allowances.

Use Cases

You can set up payroll taxes to:

Enable workers to make tax elections through employee self-service (ESS).

Calculate and track company and employee tax contributions.

Automatically adjust tax calculations when legislation changes tax rates.

Report itemized and total federal, state, and local tax contributions by company and employee.

Questions to Consider

Questions	Considerations
How often do your employees have work assignments in different tax jurisdictions? OR What's the nature of your employees' work assignments in other tax jurisdictions?	You can set up taxes for workers with work assignments in different tax jurisdictions. For: Recurring infrequent assignments, you can use payroll inputs with worktags. Example: A technical support representative travels to a tax jurisdiction only when a technical issue arises. One-off assignments, you can use either Tax Location Mapping (TLM) or payroll input with worktags to tax the worker by work location. Example: An employee occasionally works out of the office closest to their childhood home. Recurring assignments based on a set schedule, you can configure Ongoing Multiple Work Jurisdictions (OMWJ). After you enter employee tax jurisdiction by the applicable percentages, Workday automatically applies that percentage to each pay period. Example: A pharmaceutical representative assigned to a tri-state area works the same percentage of time in each jurisdiction each pay period.
Do you employ nonresident aliens (NRAs)?	You can enable Workday to calculate and report taxes for NRAs. Workday references the tax treaties that you set up when calculating taxes and taxable wages for 1042-S reporting.
Where do your employees work?	Workday maintains up-to-date tax data and calculates and reports on taxes for all states and these territories: Guam. Puerto Rico. U.S. Virgin Islands.
Do some employees in your company live in 1 state and work in another?	When employees live in 1 state and work in another, Workday can automatically calculate taxes based on state tax reciprocity agreements. This includes whether to withhold taxes and the tax calculation method specified in the agreements. When they work and live in the same state, Workday calculates taxes based on work location.
Do employees enter their time in Workday Time Tracking?	You can set up TLM so employees can specify their work location when entering time.
Does your company use a third party for sick pay?	If so, you have the option to set up Workday to display sick pay on payslips and W-2s. If your third party provides the W-2s, you can also set this option up in Workday.
Are your employees exempt from Federal Unemployment Insurance (FUI) or State Unemployment Insurance (SUI)?	If yes, you can set up Workday to manage this exemption. If not, Workday can withhold and report on FUI and SUI taxes.
Do you pay bonuses using a separate check or combine bonuses with regular pay?	If you combine bonuses with regular pay, you can set up federal taxation using a flat rate or standard withholding. If you pay them with a separate check, you have the option of using a flat rate or aggregate - standard taxation. You can also set up Workday to withhold state and local taxes on supplemental earnings.

Recommendations

Workday Payroll for U.S. is designed to assist you in withholding taxes and other amounts required by law. However, you should independently verify your withholding and remittance obligations required by the various jurisdictions in which you operate.

Requirements

Maintain your own tax authority exceptions. Example: The State Withholding Taxable Reduction
pay component group (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.

Limitations

Regardless of how you set up tax allocations, Workday doesn't apply percentage splits to SUI taxable and subject wages. Workday always applies SUI and other taxes based on SUI to the primary work state.

Tenant Setup

No impact.

Security

Domains	Considerations
Set Up: Company General domain in the Common Financial Management functional area.	Enables users to record company tax ID numbers.
Set Up: Payroll (Calculations - Payroll Specific) domain in the Core Payroll functional area.	Enables users to define payroll-specific calculations such as earnings, deductions, pay accumulations, and balances. It provides the ability to define balance periods used within payroll calculations and reporting setup.
Set Up: Payroll - Company Specific (Taxes) - USA domain in USA Payroll functional area.	Enables users to view and enter payroll-related setup for company taxes.

Business Processes

Business Processes	Considerations
Complete Federal Withholding Elections	Routes the federal withholding elections task to employees for completion. You can also configure conditional logic and include notifications and approvals.
Complete State and Local Withholding Elections	Routes the state withholding elections task to employees for completion. You can also configure conditional logic and include notifications and approvals.
Complete State and Local Withholding Elections for a Worker	Enables the payroll administrator to complete state and local withholding elections for workers.

Reporting

Use these reports to view the federal, state, and other tax data that Workday uses to calculate payroll taxes. Workday updates tax data in response to changes made by tax authorities.

Reports or Dashboards	Considerations
All Payroll Tax Allowance Data	Displays the pay components for all federal and state tax authorities.
All Payroll Authority Minimum Wages	Displays the state and local minimum wages for all states. You can add these security groups to the Set Up: Payroll (Minimum Wages View) - USA domain in the USA Payroll functional area so they can access the report: Compensation Manager Compensation Partner
All Payroll Tax Data	Displays for the tax deduction combinations that you select: Calculation methods. Calculation values. Federal and state rates or amounts. Limits.
Expiring Exempt Tax Elections	Displays a list of employees who are exempt from federal, state, or local tax withholding as of the date you enter in the Exempt Election As of Date field. Supports local exempt elections for: Michigan New York Pennsylvania Local Service Tax (LST) Excludes employees who: Have an active federal tax levy or a Lock in Letter. Transferred out of the company. In the report, you can choose to include or exclude: Terminated workers. Workers with a MSRR election.
Payroll Compliance Updates Dashboard	Displays the compliance updates that are most important to you. You can quickly identify whether a compliance update potentially impacts your employees and take appropriate action, such as: Alerting employees. Spot-checking payroll results. Preparing to answer questions.
Payroll State Authority Attributes	Displays valid marital statuses, allowances, and withholding percents by state. The default start date reflects when Workday begins tracking this data.
Payroll Tax Authority Defaults	Displays default federal and state tax authority data.
Payroll Authority Minimum Wages	Displays the state and local minimum wages for the specified state. You can add these security groups to the Set Up: Payroll (Minimum Wages View) - USA domain in the USA Payroll functional area so they can access the report: Compensation Manager Compensation Partner
Payroll Tax Mapping Inactivation on Worker	Displays tax authority data for worker-level TLM configurations.
Payroll Tax Mappings on Location	Displays all: Payroll tax locations. TLM activation status. Respective tax authority data. Used for the TLM feature.
View Payroll Other Tax Authorities	Displays tax data for state and local tax authorities except withholding and unemployment, including: Region. Start date. Tax associated with the authority. Tax codes. Whether the authority allows tax override rate on company reporting. Whether worker exemption is allowed (for mandatory taxes) or election is required (for nonmandatory taxes). Whether the tax for workers with multiple jobs is based on the primary work state (SUI tax authority).
View Payroll Tax/Allowance Data	Displays for each tax authority: Calculation methods. Compliance updates. Federal or state rates or amounts. Limits. Values.
View Payroll Tax Authority	Displays all tax authority: Default allowances. Valid and default marital statuses. Valid and default supplemental tax methods.
View Workers with Missing US Tax Elections	Displays a list of workers who are missing federal or state tax elections at the end of the selected period

Integrations

Web Services	Considerations
Get Payroll Federal W-4 Tax Election	Retrieves worker federal W-4 tax election data from either the reference ID or the worker reference / company reference / effective date.
Get Payroll FUTAs	Retrieves worker FUTA tax election data from either the Reference ID or the Worker Reference/Company Reference/Effective Date.
Get Payroll Payee FICAs	Retrieves FICA exemption data for a worker and position. Uses the processing position for workers with multiple jobs if you enabled the feature.
Put Payroll Federal W-4 Tax Election	Enters worker federal W-4 tax election data.
Put Payroll FUTA	Enters and modifies FUTA records.
Put Payroll Payee FICA	Enters and modifies FICA records. Uses the processing position if you: Enabled the feature for workers with multiple jobs. Don't specify a position for the worker and set up the payroll processing position rules to use the position override.

Connections and Touchpoints

Features	Considerations
Benefits	Workday uses earnings that you create for credits and imputed income.
Time Tracking	Workday Payroll can use the location entered during time entry to calculate state and local taxation of associated earnings.

Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.