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OHAKOI001 - Prevent outflows caused by differences in tax rates alone

OHAKOI001 - Prevent outflows caused by differences in tax rates alone

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If you want to prevent outflow from occurring within a particular pay period just because the tax formulae or rates of the retro and current pay period are not the same, then you must enter constant TONON in Payroll Constants table T511K. The value of the constant must be set to an arbitrary integer (1, 2, 3, and so on - see example 2 below), while the start and end dates must be set to 01.01.1900 and 31.12.9999. Setting the value of the pre-defined constant to value m will not generate an outflow within pay period n if calculated from a pay period equal to the sum of m and n.

Under the following conditions, the influx principle will still be applied and an outflow will be generated.

  • The pay dates of the retro pay period and the current pay period do not lie in the same year. (In other words, you cross a calendar year during retrocalculation.)
  • The Business Number, Quebec Taxation ID, or province of employment of the retro pay period and the current pay period are not the same.
  • The value of constant TONON is m, the pay period currently being processed is n, the original pay period is greater than the sum of m and n, and tax formulae or tax rates have changed.
  • The pay period currently being processed is not a regular pay period and tax formulae or tax rates have changed.

The configuration discussed here addresses processing methods without regard to their possible adverse legal implications. Therefore, we strongly recommend that your enterprise first contact the Canada Revenue Agency and le Ministère du Revenu du Québec (if applicable) to discuss the legal implications of the processing that you wish to perform.

Please discuss the implications of your chosen processing method with the appropriate authority before you take steps to implement it.

As delivered, during outflow/inflow processing, the standard system only considers wage types that cumulate into technical wage type /101 (Total gross). Non-taxable cash wage types, which are not considered during standard outflow/inflow processing, must cumulate into technical wage type /110 (Net Payments/Deductions).

If the sum of the differences of all taxable cash payments within a particular pay period is positive, then the standard system generates an outflow, which will be accounted for in the current pay period.

If the sum of the differences of all taxable cash payments within a particular pay period is negative, then no outflow will be generated.

  1. Execute the activity associated with this IMG step.
  2. On the subsequent screen, choose New Entries.
  3. On the screen thereafter, enter constant TONON, start date 01.01.1900, end date 31.12.9999 and, in the Value column, an integer of your choosing.
  4. Save your entries, then exit this step of the Implementation Guide.

Example 1
Employees of your enterprise are paid on a bi-weekly basis; currently, you are paying your employees in arrears. Because you are paying employees in arrears, during payroll calculation of the current pay period, you will always retrocalculate the previous pay period, since wages - earned within the previous period - have been entered into the system. For example, running payroll in pay period 13 will result in retrocalculation of pay period 12. In pay period 12, wage type M001 will now contain $2,000, where it previously contained $0. In pay period 13, wage type M001 will contain $0. Let us assume that the formulae or rates for tax calculation changed between the pay date of pay period 13 and the pay date of pay period 14. Running payroll for pay period 14 will result in a retrocalculation of the previous pay period (13). For pay period 13, the influx principle would be applied and wage type M001, with an amount of $2,000, will flow out. The amount then flows into pay period 14; it is taxed according to the bonus method.

Example 2
Assume that identical conditions apply as in example 1, except that you have set constant TONON to value 1. As before, running payroll for pay period 14 will result in a retrocalculation of the previous pay period (13). However, in this case, the origin principle, instead of the influx principle, would be applied to pay period 13, since 14 - 13 = 1, which fulfills the condition of being less than or equal to the integer assigned to constant TONON. Thus, no outflow would be generated.

Example 3
Assume that the same conditions apply as in example 2, except that you are now running payroll for pay period 15. After you ran payroll for pay period 14, employee Claude Veilleux received an additional retroactive salary increase. Wage type M001 was increased by $100. In each of the pay periods 1 through 12, an outflow of $100 will be generated. However, in this case, an outflow of $100 will also be generated in pay period 13, since 15 - 13 = 2, which no longer fulfills the condition of being less than or equal to the integer (1) assigned to constant TONON. In pay period 14, no outflow will be generated, and in pay period 15, an inflow of 13 x $100 ($1,300) will be performed.






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