Payroll Tax Reciprocity

This functionality controls the way in which payroll tax withholding is handled when the taxing authority the employee resides in differs from the authority he performs work in. This enables an employee's withholding to more closely match his or her actual tax liability. Reciprocity may pertain to relationships between states, relationships between local authorities, and relationships between other authorities.


When a line of labor is entered (in the Labor Journal or Work Order), the system must decide the appropriate payroll tax authority to default for the state, local and other fields. Several possible scenarios exist regarding the application of worksite payroll tax vs. payroll tax due to the employee's residence taxing authority.

1. No tax is due the residence tax authority as long as the worksite tax is withheld

2. (State taxes only) Residents of CA, DC, IN, OR and VA are exempt from worksite taxes as long as taxes are withheld from the state of residence.

3. A Residual Tax is due on wages earned outside of the authority of residence.

4. Tax is withheld for the authority of residence if a reciprocal agreement exists between the worksite and resident authorities.

5. Special case for Missouri (depending on the worksite state).

Registry Setting: Office/Field Determined by Job Cost Code
An option of the sys-ffv-global-settings registry entry (Registry Entry Global Settings ) enables the system to determine whether hours should be considered 'office' or 'field' depending on the Job Cost Code's Work Type setting. If this option is implemented, hours charged to a 'Field' Job Cost Code will be considered field hours, regardless of whether the employee is Office or Field.

For field employees (or for hours entered for any employee if the above registry setting is in effect), the system now checks the following when determining which authority to use:

·   The location of the work (in the Job record)

·   The employee's residency (in the Employee tax tab)


EMPLOYEE Record (for Field Employees):

Setup Employee as Field.

Setup Employee with a default State [Local, Other] Tax Authority (Tax Info Tab).

On Child Tax Tab setup residency state tax table and mark the employee as a resident.

JOB Record:

On the job set the Field box in the Cost Code.

On the (Financial Tab) setup the State [Local, Other] Tax Authority.

This will default when the Field employee does work on this job.

Option 1 Withhold at Resident State: If you wish to withhold at their resident state do not fill in the Financial Tab overrides on the Job. The process will look to the job for the override and if none exist it will use the employee default.

Option 2 Reciprocity:

On the Job’s Financial Tab set up the State [Local, Other] Tax Authorities.

In the Tax Authority record set the Child Reciprocity Agreement Tab with the reciprocal state Authority(ies).

The process will look to the job for the overrides and then to the Tax Authority Reciprocity Agreement Tab and check if the employee has one of these authorities setup and is a resident. It will then use the resident authority.

If the Tax Authority located on the Job (Financial Tab) does not have a Reciprocal Agreement with the State of the employee’s residence then the employee MUST HAVE that state loaded on the (Employee’s Child Tax Tab) for withholding tax to be computed. Do not mark this state as always withhold or resident.

States that DO NOT have income tax (i.e. Tennessee) you MUST set this Tax Authority record (Child Reciprocity Agreement Tab) with ALL states where your employees reside that could possibly do work in that state. Otherwise no state withholding tax will be computed.

Note on Warranty Jobs:

Warranty jobs are usually setup without a client site reference. This allows these jobs to be used for multiple sites. However, in the case of Payroll a warranty job per Payroll Taxing Authority must be setup to properly withhold tax for employees working on these jobs. Example (Warranty jobs: TRANE-OH, TRANE-PA, …)