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Jan 01, 2019 at 07:21 AM

Clearing process for Overpayment if there are both Regular and Supplemental Earnings

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Hello,

**This question is for an issue in US Payroll**

We have a scenario where an employee was paid Regular & Supplemental wages in the Regular payroll run. During this payroll execution, the taxes were calculated as expected. Regular wages were taxed at regular rate and Supplemental wages were taxed at supplemental rate since we use the derivation from processing class 68 value to determine the tax calculation method in the payroll schema.

Employee terminated at the start of pay period and we had to back out the wages which caused an overpayment. We use wage types to clear the overpayment and used two different wage types. First WT has processing class 68 value 1 and this was created with the overpayment amount of Regular wages. Second WT has processing class 68 value 2 and this was created with the overpayment amount of Supplemental wages. During payroll execution, taxes were calculated on the higher side and the entire overpayment amount was taxed at supplemental rate. On further analysis of SAP code in USTAX function, I found there was no tax calculation for Regular wages since that amount was not sufficient to clear the entire overpayment. The overpayment was cleared after the second WT was processed and therefore the entire amount was taxed at supplemental rate.

Can anyone tell me a process to clear overpayment when both Regular & Supplemental wages are to be processed? I can only think of adjustting the taxes using IT221 after overpayment is cleared.

Thanks,

Mitesh