Overview: In Oracle HCM Cloud Payroll, third-party tax file is used to send tax and earning details to ADP for filling tax for employees. This tax file can be used for generating W2 files for employees by third party. However, there are scenarios that employee tax is not sent directly to the file like “Oregon Transit Employer Taxes”. These taxes are defined manually by populating the details in quarterly file. This article will explain the process to create and populate the custom balance with additional configuration in Oracle HCM Cloud which will help to populate the custom balance result in quarterly tax file.

Below are the steps to accomplish this requirement

  1. Discuss the tax-filling provider whether the tax code can be used for payment process.
  2. Create the deduction element
  3. Whether this is used for single or multiple jurisdictions.
  4. Configure custom balances
  5. Prepare for third party reporting
  6. Add deduction element on element Entry page
  7. Payroll run for the employee assigned with deduction element.
  8. Run Quarterly tax file for verify the custom balance feed on file.

 

1. Discuss with tax-filling provider whether the tax code can be used for payment process.

This discussion is needed before making the changes. There is a restriction on tax code value based on tax level. They are:

  • Federal: Any alphanumeric value, up to 15 characters.
  • State: Any alphanumeric value, up to 13 characters. 2 character is prefixed automatically with state postal code.
  • County: Any alphanumeric value, up to 10 characters. 2 is state postal code and 3 is county geocode automatically prefixed.
  • City: Any alphanumeric value, up to 6 characters. 2 is state postal code, 3 is county geocode and 4 is city geocode automatically prefixed.
  • School District: Any alphanumeric value, up to 8 characters. 2 is state postal code and 5 is school geocode automatically prefixed.

 

2.Create the deduction element.

This deduction element is employer tax wages. Suppose there is a need to send the additional tax details for employer. This element will help to populate the additional amount deduction for employer component.

Create the deduction element

3.Whether this is used for single or multiple jurisdictions.

If there is a specific state or city/specific jurisdiction for this deduction then this can be taken care with modification of existing fast formula suffix with Tax_CHG_DEDN and CHG_DEDN_CALCULATOR. If there are multiple state or city/multiple jurisdiction deduction then entry should be at element entry page. It is recommended to keep the generic one and populate the value at element entry of assignment.

4. Configure custom balances.

Custom balance is defined with dimension which stores the value after payroll run. These balances are column value on tax file. Hence minimum balances (Such as Gross, “Reduced Subject Wages” and “Taxable Wages”) should be created to populate the expected values on tax file for particular tax code.

Handling Custom Tax Codes

Dimension example for Federal. Same list should add to all balances which needs to be created.

Configure custom balances

5. Prepare for third party reporting.

Open the HCM Enterprise Information task page and add these custom balances on page. Make sure to assign the same custom tax code name for all balances at balance assignment section.

Prepare for third party reporting

6. Add the deduction element on element Entry page

Add the deduction element on element Entry page

7. Payroll run for the employee assigned with deduction element.

Payroll run for the employee assigned with deduction element

8.Run Quarterly tax file to verify the custom balance feed on file.

Oracle HCM Cloud

Custom tax code is available in Quarterly Tax file.

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