Why is the Tax Adjustment component not included in the tax calculation for the current period?

This feature is available on all PaySpace editions.

By system design, the system will use the Averaging Tax Method to calculate the Tax Paid component for the month.

If the user decides to adjust the tax using the Tax Adjustment component, the system will take the amount processed into consideration and recalculate the Tax Paid component for the next period.

The Tax Adjustment component should be used with the intention that the user wants to advise a certain MTD value contrary to what the system calculates and the adjustment would result in this value.

Example: The system calculates the Tax Paid component of R1000.00 however, the employee should pay R1 200.  Therefore, process the Tax Adjustment component of R200.00 to obtain the final result.

The system will however take the R200.00 into consideration for the next period when calculating tax and it may see this as an overpayment. This could result in the next period having a lower than usual Tax Paid component, assuming taxable regular earnings/tax deductibles etc. remain constant.

If the Tax Adjustment component were to be considered in the current YTD taxes, this would mean this would affect and recalculate the current MTD Tax Paid. The Tax Adjustment component is not meant to recalculate tax in the current period and this would mean the adjustment value would no longer be correct.

Note!

• When the Tax Paid component is negative the system will suppress the value to zero in the front end, however, the system will still store the negative value in the back end and offset it against future positive tax. The Tax Adjustment component can however be used to refund tax should the customer wish to do so. If the customer does wish to refund tax, it is usually best practice to refund tax in the run in which the negative value occurred.
  

• The Tax Adjustment is considered in the current YTD 4102 tax code line, which can be seen on the Tax Certificates / Tax Drill Down screen. Example: Looking at the YTD 4102 figures for August, R65 402.69 - R27 214.81 = R38 187.80.
  

      

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