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Tax information tasks [AX 2012]

Updated: February 20, 2014

Applies To: Microsoft Dynamics AX 2012 R3, Microsoft Dynamics AX 2012 R2

This topic describes how to specify organization-wide settings for payroll taxes.

Payroll taxes are set up in two parts. The first part, which is described in this topic, covers the settings that are used throughout the organization, such as the states where you have a nexus, or the rates for unemployment taxes. The second part, which is described in Worker payroll tasks, covers the additional tax information that must be provided for each worker.

This topic describes functionality that is available only if Payroll for Microsoft Dynamics AX 2012 is installed.

NoteNote

This topic includes information about features that were added or changed for cumulative update 7 or later for Microsoft Dynamics AX 2012 R2. This information also applies to AX 2012 R3.

Click these links to find more information about the concepts that are discussed in this topic.

Setting up and maintaining Payroll

One of the most important factors in determining whether a legal entity must pay taxes in a state is whether the legal entity has a nexus, or a significant business presence, in that state. In Microsoft Dynamics AX, each state or territory where a legal entity has a nexus is defined as an employer tax region. Every legal entity must have at least one employer tax region. Legal entities that have a nexus in more than one state have multiple employer tax regions. These employer tax regions are used with multiple-state taxation and reciprocity rules to determine when and where to withhold and pay taxes.

ImportantImportant

The question of whether a legal entity has a nexus in a particular state can be complex and difficult to answer. The determination is usually made by your legal advisors.

  1. Click Payroll > Setup > Taxes > Employer tax regions.

  2. Click New.

  3. In the State column, select a state or territory where your organization has a nexus.

  4. In the Active column, select the check box.

    If you do not select the Active check box, payroll taxes for the state or territory are not withheld.

Repeat these steps to add more states or territories where your organization has a nexus. When you are finished, close the form.

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Tax regions identify the cities where your workers can work and where they claim residency for payroll tax purposes.

Before you begin, it is helpful to determine the county, state, and ZIP/postal code for each city that you identify as a tax region.

  1. Click Payroll > Setup > Taxes > Tax regions.

  2. Click New to open the Tax region form.

  3. In the Name or description field, enter a name to use for this tax region. For example, you might enter CO Denver for Denver, Colorado.

  4. In the ZIP/postal code field, enter the ZIP code for this tax region. If you do not have the ZIP code, enter either the city or the county and the state in the appropriate fields.

  5. Click OK.

    If more than one tax region matches the location information that you entered, the Multiple tax regions form opens. Select the location for this tax region from the list, and then click OK.

Repeat these steps to create additional tax regions. When you are finished, close the form.

For information about how to assign tax regions to workers, see Worker payroll tasks.

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You do not have to create tax codes. The codes for all payroll taxes that are supported by Microsoft Dynamics AX are provided for you. However, you must provide information about how your organization uses each tax code.

ImportantImportant

For a list of payroll taxes that are not supported by Microsoft Dynamics AX, see Tax codes (form).

Before you begin this task, create a list of the payroll taxes to configure. For each tax, determine the following:

  • The legal entities the tax applies to.

  • The main account that will be used for the tax.

  • The wage base, account ID, or rate, if the taxing authority has specified them. For example, unemployment taxes usually have a specified rate.

  • The reporting requirements for the tax for Form W-2.

Tax codes are automatically assigned to workers based on their worker tax regions, position, and legal entity. The worker tax code can then be set up for each worker’s individual tax situation. For information about how to set up worker tax codes, see Worker payroll tasks.

  1. Click Payroll > Setup > Taxes > Tax codes.

  2. Select a tax code to set up.

  3. On the Tax code details FastTab, do the following:

    1. Select the legal entity that the tax code applies to.

    2. On the General tab, do the following:

      • Optional: In the Report description field, enter a description of the tax. This description is included on printed pay statements and on other reports, instead of the default description that is provided with the tax code. To use the default description, leave this field blank.

      • In the Account ID field, enter the account number that the legal entity has with the taxing authority.

        State income taxes always have an account ID. For other taxes, if the taxing authority has not specified an account ID, leave this field blank.

      • In the Wage base field, enter the value specified by the taxing authority.

        In most cases, the taxing authority does not specify a wage base. If no wage base is specified by the taxing authority, leave this field blank.

      • In the Rate field, enter the rate that the legal entity pays. For example, if the rate is 2.5 percent, enter 0.025.

        Unemployment taxes always have a specified rate. For other taxes, if the taxing authority has not specified a rate, leave this field blank.

    3. On the Accounting tab, do the following:

      • To automatically create invoices for the calculated tax amounts, in the Vendor field, enter the agency that the tax is paid to.

        If you prefer to create tax invoices manually, leave the Vendor field blank.

      • If the tax code will ever be used for employer tax transactions that are posted to a project instead of to the general ledger, select a project category.

        If you do not specify a project category, and a tax code line that uses this tax code must be posted to a project, you cannot generate the pay statement.

        NoteNote

        This field is never used for taxes that are paid by the worker.

      • In the Default financial dimensions group, enter the default financial dimensions for the main account. The specific field values to enter may vary, depending on how financial dimensions are set up for the legal entity.

      • In the Posting rules group, enter the main account that this tax should be posted to.

        For employer taxes, the main account is the account where employer tax transaction costs are posted. For employee taxes, the main account is the account where the withholding liability is posted. This account is used for all transactions that are related to this tax code and legal entity.

    If the tax code is used by another legal entity, repeat this step.

  4. On the Reporting FastTab, enter any information that is required for boxes 10, 11, 12, or 14 of Form W-2.

    If you cannot see the Reporting FastTab, you might have to close the Tax code details FastTab.

Repeat these steps to set up additional tax codes. When you are finished, close the form.

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In AX 2012 R3 and cumulative update 7 or later for AX 2012 R2:

Before you begin this task, create a list of the tax codes to include in each tax group.

In most cases, you will include all the tax codes that share the same accounting information in a single tax group. In addition, if a set of tax codes shares the same posting requirements, you can include them in a single tax group that you enable for posting definitions. A tax code can be included in multiple tax groups, as long as only one of the tax groups is enabled for posting definitions. For more information, see Tax groups and posting definitions.

TipTip

You can set up the transaction posting definitions in such a way that some tax codes in the group use a different posting definition than the rest of the tax codes in the group. For more information, see Transaction posting definitions (form) or Tax groups and posting definitions.

  1. Click Payroll > Setup > Taxes > Tax groups.

  2. Click New, and then enter a name and description that identify the tax group.

  3. Click Add to open the Add tax codes to a tax group form.

  4. Select the tax codes to include in the tax group, and then click Add.

  5. Optional: If you plan to use this tax group in transaction posting definitions, select Enable posting definitions.

    Each tax code can be included in only one tax group that is enabled for posting definitions.

Repeat these steps to set up additional tax groups. When you are finished, close the form.

After you create tax groups that are enabled for posting definitions, you can assign those tax groups to transaction posting definitions. For more information, see Assign posting definitions to transaction posting types or Transaction posting definitions (form).

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In AX 2012 R3 and cumulative update 7 or later for AX 2012 R2:

The financial information for each tax code is set up separately for each legal entity. If you change the values for one legal entity, the values for any other legal entities are not affected.

When you update a tax code by using the mass-update functionality, the changes are effective immediately.

  1. Click Payroll > Setup > Taxes > Tax groups.

  2. Select a tax group, and then click the Mass update button.

  3. Select the legal entity to update the tax group for.

  4. Select one or more of the following fields to update:

    • Vendor

    • Project category

    • Default financial dimensions

    • Main account

  5. Enter the new values for the selected fields.

    Caution noteCaution

    If you select a field and you do not enter a value, the field is cleared on all the tax codes in the tax group.

  6. Review the list of affected tax codes to make sure that you want to change every tax code in the list.

  7. Click Update.

NoteNote

You can click the Update tax data link on the Payroll area page to generate the system-defined tax groups. You can enable system-defined tax groups for posting definitions, and mass-update the accounting information for them, just like for user-defined tax groups.

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