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Tax Computation Advanced Percent

Posted: Thu Dec 31, 2020 1:35 pm
by nightbringer
Hi, I'm not sure why the wrong tax bracket is being applied to the computation, and I'm kind stumped.

I have 5 brackets that are computed for tax and is set up as follows the Gross income is the include pay Stub Account for all the brackets:

[Name] = Income Tax 2020 bracket 2
[Calculation] = Adv Percent (Tax Bracket Alt.)
[Percent] = 20
[Annual Amount Greater Than] = 250000
[Annual Amount Less Than] = 400000
[Annual Deduction Amount] = 250000
[Annual Fixed Amount] = 0

[Name] = Income Tax 2020 bracket 3
[Calculation] = Adv Percent (Tax Bracket Alt.)
[Percent] = 25
[Annual Amount Greater Than] = 400000
[Annual Amount Less Than] = 800000
[Annual Deduction Amount] = 400000
[Annual Fixed Amount] = 30000

[Name] = Income Tax 2020 bracket 4
[Calculation] = Adv Percent (Tax Bracket Alt.)
[Percent] = 30
[Annual Amount Greater Than] = 800000
[Annual Amount Less Than] = 2000000
[Annual Deduction Amount] = 800000
[Annual Fixed Amount] = 130000

.....

The others are not relevant for the example.
the tax table is:
Screenshot 2021-01-01 042104.jpg
I computed for a semi-monthly payroll with the Gross income being 45000
But the income tax is 4166.67.

the desired income tax should be
45000 * 24 = 1080000 therefore Bracket 4
(1080000 - 800000)*0.3 + 130000 = 214000
214000/24 = 8916.67

But the Bracket it chose is bracket 3 i verified this by changing a value in bracket 3 and it affected the output but changing anything in bracket 4 did not affect the output

I tried to formulate as to where the 4166.67 came from I think it came from Time trex calculating it by :
45000 * 12 (months in yr) = 540000 therefore bracket 3
(540000 - 400000)*0.25 / 12 = 2916.67
30000 / 24 = 1250
2916.67 + 1250 = 4166.67

I'm not sure if I did something wrong in the setup of Time trex.

Re: Tax Computation Advanced Percent

Posted: Thu Dec 31, 2020 2:35 pm
by shaunw
TimeTrex multiplies the per pay period earnings by the number of pay periods in the year to get the annual earnings for purposes of calculating tax brackets. So if you are using a Monthly pay period schedule (12 per year), then it would take their earnings for a single pay period (month) and multiply that by 12 to get the annual salary. Therefore your pay period schedule in TimeTrex must match the frequency that the employees are actually getting paid of course.

Re: Tax Computation Advanced Percent

Posted: Thu Dec 31, 2020 11:43 pm
by nightbringer
But it is set to use Semi-Month so it should use 24 right?

Re: Tax Computation Advanced Percent

Posted: Fri Jan 01, 2021 9:56 am
by nightbringer
I think I know the problem now as to why this happens, I read the code and the way it calculates it quite different.

what I needed was to calculate the yearly amount then apply the bracket according to the criteria ie.

annual amount : 1080000 which would be applied to bracket 4

But the way that Time trex calculates it is that before checking for the bracket it subtracts the annual deduction amount first ie.

1080000 - 400000 = 680000 which would fall under bracket 3.

Not sure if this was the intention though

Thank you for the quick response!

fix would be to remove annual deduction amount.