Concept: Negative Tax Withholding for Negative Taxable Wages (USA)

When you process retro pay input and a negative wage adjustment results, Workday can calculate negative taxes. This makes the tax adjustment process more efficient.

To use this feature:

Select the

Enable Negative Tax Withholding for Negative Wages on Payroll Result

check box on the

Edit Tenant Setup - Payroll

task. When you select this check box, Workday can calculate taxes to be credited, if you process a retro pay input and the retro differences result in negative taxable wages for a tax authority.

Select the

Prior Period Tax Adjustment

check box when you enter a retroactive pay input with a negative earning.

Verify that negative taxable wages exist in a pay result, caused by retroactive pay calculation differences that were processed in the period.

To ensure a worker receives a tax refund on their negative taxable wages, the worker must have a positive tax balance and you must apply State or Local worktags to the retroactive payroll input that you create to process their negative earnings.

This feature supports state withholding (work) taxes and these local withholding taxes, when the

Do Not Allow Negative Tax Withholding

field is set to No
:

Local City Withholding (Work) Employee and Employer

Local County Withholding (Work)

Local Other Taxes

You can view the local tax authorities that don't support refunding taxes and whether negative tax withholding on a payroll result is enabled using the

Do Not Allow Negative Tax Withholding

report field. Workday recommends you run these reports to view which tax authorities don't support refunding taxes:

All Payroll Tax Authorities

View Payroll Other Tax Authorities

Use the

Audit Prior Period Tax Adjustments – Retro Pay Input Causing Negative Taxable Wages

report to:

Audit prior period tax adjustments that were processed using retro payroll input with the

Prior Period Tax Adjustments

check box selected, that resulted in negative taxable wages on the payroll result. The audit also alerts you when the adjustment crosses a month, quarter, or year.

View workers with incomplete payroll results that have negative taxable wages, which you can adjust before closing the payroll period.

2023R2 What's New Post: Enable Negative Tax Withholding for Negative Wages