BPM Name :

Tax Allocations

Department :

Organization :

H711

IBM US Payroll

Process Owner (Manager ):

Nicholas Harbol/Endicott/

Process Administrator :

Terry Lashway/Endicott/IB

Reviewer :

Denise French/Endicott/IBM

Description of Process

PROCESS/PROCEDURE:
STATE AND CITY ALLOCATIONS
AP1: Receive and Review Tax Allocation request
Forms / Requests are received via Lotus Notes either from employees or employee's
manager allocating the time spent working in a specific state or city. The notes are sent to
TAXALLOC@us.ibm.com. This id is monitored by the Tax Allocation processor. The
processor will review the Tax Allocation request to insure that all necessary information has been
received. This includes Work Locations and days, or time frame that employee will be working in
the determined location. If there is reciprocity with the resident state (Tax Rule R), then no
allocation is necessary. The deadline for Tax Allocations to be processed is December 1 which is a
published date. However, they are processed through the last day of Retro for the Tax Year. If a
request is received after the processing cut off, it can not be processed in Payroll for the year. The
data is updated in the Percolator Database to initiate a W2 correction for the employee. Reply to
employee with the information that the employee has missed the deadline and that the request has
been put into the queue for a W2 correction. A W2 Correction will be completed by the Manila Tax
Operations team.

DP1: Review Tax Jurisdiction

Review Tax Jurisdiction Code to insure it's inline with request. The TJC should be set to the
employees NORMAL Tax Jurisdiction Code since an allocation is set up for sporadic travel. For
example, if the employees normal TJC is Lives NY /Works NY (NYA) and is requesting a 20%
allocation to IL for a period of time, the employee must leave their TJC as NYA, and not change it to
Lives NY / Works IL.

AP2: Contact Employee / Manager if TJC is incorrect

If necessary have Manager/Employee update TJC if necessary to implement the Allocation,
or if error is noticed..

AP3: CALCULATE STATE AND CITY TAX ALLOCATION

PERCENTAGE
When updating the State and City Tax Allocations in NPS, use Percentage Code "L"
for States and Cities that report allocated wages and use "D" for States and Cities that
report full wages. Even if the Wages are full, the taxes are at the proper percentage of full
reporting of wages.
The following States/Cities are full reporting jurisdictions and use the "D" Code. All other
States and Cities not listed below, use the "L" Code. PLEASE NOTE THAT ALL RESIDENT
STATES/CITIES HAVE TO USE D AS THEY REQUIRE ALL OF THE WAGES, PER
TAXATION DEPT.
Also for a person doing an allocation for US/VI for example you uses a L code as you
only report the time worked in each location, and the VI(or PR, MC, GU), tax is an only
an offset for the US FIT and not for state tax. The Resident State in this case gets no
allocation , because a state like Illinois does not give you a credit for taxes paid in VI, only
the U.S. gives you a credit.

State
New York

City
Battlecreek, MI
Detroit, MI
Flint, MI
Jackson, MI
Grand Rapids, MI
Lansing, MI
New York City, NY
Yonkers, NY
Denver, CO

DETERMINATION METHODS OF ALLOCATION.

ALLOCATION METHODS
There are two methods that can be used for allocation; either annual or via date range.
1.

Annual Allocation

If an employee provides either an annual total or estimate, we would divide their total
days by the total possible work days in a year to come up with their annual
allocation percentage.
For example, an employee states that they will work in CT for 60 days during 2000. The
60 days would be divided by 251 to come up with the annual allocation percentage of
24% (0.24).

2.

Date Range Allocation

If an employee states that they have worked a number of nonconsecutive days in another
state but only for a portion of the year, we would determine the amount of possible work
days between their effective start date and effective end date (effective dates must be the
1st or 16th of the month to correspond with the payroll cycle dates). We would divide
their total work days by the total possible work days during that time frame only.
For example, an employee states that they worked for 60 days in CT between the payroll
effective dates of 5/01 through 10/01. There are 106 possible work days between the
payroll effective dates of 5/01 and 10/01. The 60 days would be divided by 106 to come up
with the allocation for that date range only at 57%.
** Reportable days are work days as outlined by the employees CERIS profile.
Weekends are not considered as reportable days unless their CERIS profile states that
weekend days are part of their normal schedule. Most employees profiles state that the
employee works Monday through Friday (40 hours/week) and is exempt from additional
compensation or overtime pay for any other work performed outside of these parameters.
Holidays are reported to the employees resident state.**

AP4: UPDATE ALLOCATIONS ON PAYROLL:

When setting up an allocation it is important to verify the tax reciprocity rules for the
states that you are setting up. To check the reciprocity rules, go to screen 751, Table 456.
Enter the Lives and Works state and verify the tax rule. Set the allocation up according to
the tax rule. See TAX RULE SECTION of this document for definition on Tax Rules
and how to set up the Lives / Works states.
To create the allocation in payroll:
1. Access A6U screen (update screen), by typing A6U and pressing enter.
2. Type employees serial number (enter)
3. Tab to the first blank section.
4. Type the following required tabs:
a) Type in date (1st or 16th as date). Always use the 1st or 16th for the starting or
end date. It is important to use the 1st or 16th dates when shutting the allocation

off. The reason is if the allocation is shut off , for example, on the 15th of the
month, the system will not take the tax for that payperiod and the Tax Loan desk
will not be able to make the correct reimbursement to the employee.
b) Tax no. (ex. KYLEX for Lexington, KY)
c) Take code (enter Y for yes)
d) Enter marital status -always S (single)
E) Enter residence code of N for non-resident, or R for resident
Required dependencies (Default is 0, as using other can under withhold taxes. If
the employees resident state is set up with a W4 equivalent for that state, follow
the dependencies as set up)
f) Use Code L or Code D as noted above (State and City Tax Allocations
Percentage Codes) for further detail. These codes go in the CODE column of the
-OVER STANDARD - area- of A6U.
g) In this -OVER STANDARD - area, Tab over to the AMOUNT/PCT field
and type the employee desired percentage of allocation ie. 50.00 for 50%.( If
these fields had been used for a dollar amount it would have been used a F code for
fixed amount.
h) While you could tab over to the confirm column and enter "Y" for yes, this is
handled better by a Lotus note from the processor, so just hit enter twice to finish the update.)
i) Next Hit home key and type in A6I + PF8. Repeat above
j) Monthly Daily Activity reported are gathered by a Tax Ops team member and
are reviewed for accuracy as verification that processing was done correctly.

AP5: Notify Employee that Allocation has been set up.

The tax allocation processor sends a note the employee after the allocation has been set
up informing that the allocation has been set up. Also, the notification tells the employee
that if retro determines additional taxes must be taken due to the start date of the allocation, that will
occur in the next semi payroll calculation. The letter also gives the employee instructions on how to
apply for an Excess State Tax reimbursement should they meet the requirements of that process.

AP6: Daily Review of DARs

DARs are reviewed by the Processor daily to check Allocations for accuracy.

DP2: Errors on Daily Activity Report (DAR) Review

This is a review of the DARs for the Tax allocation process DARs are reviewed for
Accuracy, and any exceptions corrected in the system.

AP7: Correct Errors found on DAR Review.

If any errors were found on DAR review ensure corrections are made and DARs reviewed the
following day to ensure that the appropriate correction was indeed made.

TAX RULES
Rule R: The employee is only withheld in the Resident State. No allocation needs to be
set up.
Rule 1: The work state is withheld first and any difference is withheld to the resident state.
Only set
the allocation for the work state(s) and the system with handle calculations and remit
any taxes to
the resident state. W2s are issued for both resident and work states. When setting up and allocation
where the normal tax rule is a tax rule one state, both work states need to be allocated.For example,
if an employee is Lives CT, Works NY and requests a 40% allocation to VA. When setting up the
allocation, NY will need to be allocated to 60% and VA set to 40%. Failure to do that will cause
NY to be withheld fully and an additional 40% to withheld to VA.
Rule 2: The employee is withheld only in the work state, but the gross is reported to work
and resident states. Set the allocation up for the percentage to the work state, and also the
residual percentage to the resident state.
Rule 3: Both Work State and Resident State are with held at full amount with no credits.
Set allocation up for work state to withhold for time worked outside of rsident state.
Resident state will be withheld fully.
Rule 4: The resident state is withheld first and the difference if any will be withheld for the
work state. Set up the allocation for both the resident and work states based upon time worked out
side of the resident state.
Additional Desk Level instructions are in the file below.