STEPS TO REPRODUCESet up Employee with NY as resident Tax State
Set up PR Company Parameters to Follow Job for Tax State
Set up job with PA as Tax State
Set up PR State Information for NY with the two boxes for Post Difference to Resident Tax State and Accumulate Subject Earnings in Resident State checked
Set up a 401K deduction code, and assign this to the Basis codes for the NY State withholding Deduction code.
Per state regulations, 401K is considered pre tax for NY State withholding, but is not considered pre tax for PA, so do not include the 401K deduction code in the basis codes for the PA State withholding deduction code
Add this 401K deduction to the Employee
Post a timecard line for the Employee, with the tax state being PA
Process and post this Timecard
Process this employee in PR Employee Pay Sequence Control
CURRENT RESULTSThe Subject and Eligible wages for PA and NY are not reduced by the 401K deduction amount
EXPECTED RESULTSExpect to see that the subject and Eligible wages for NY are reduced by the amount of the 401K deduction
Jeanne Key
| Company | Oldcastle Materials Group |
| Job Title / Role | PR Admin |
| I need it... | Yesterday...Come on already |
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In this scenario, wages posted in PA for a NY resident, the PA state tax will be calculated on earnings w/o reduction for pre-tax 401k (not allowed in PA). The 'post difference' feature allows residents in higher tax states to have additional state tax w/h from those same earnings to avoid under withholding at year end. Taxes for both the posted and resident state are calculated on the same basis earnings when determining whether a difference exists. Basis reduction for pre-tax deductions is only realized when earnings are actually posted to a state allowing the credit (e.g. NY). In this case, both the NY state tax and subject earnings will be greater then they would have been had the employee's earnings been posted in NY.
Due to complications when apportioning credit for pre-tax deductions when an employee works across multiple states within a single pay period, adjusting the basis when calculating a difference in taxes will not be feasible.