This topic walks you through an example of creating a federal tax formula in Sage 50. While the rates and syntax used may be accurate at the time this was written, they will change. If you choose to create your own tax formulas, then you must research www.irs.gov or other sites/publications to make sure you have up-to-date rates and limits. This example is intended to show: a) how to use some of the functions and formulas in Sage 50's payroll areas, but, more importantly, b) a method to use for creating tax formulas.
(missing or bad snippet)In this example, we are creating a FUTA tax for the 2007 tax year. The exact functions and syntax used here will not work in all cases for other types of taxes (or even for FUTA in subsequent years).
In our example, we find that the rate for FUTA is 6.2%. However, this rate only applies to the first $7000 you pay each employee as wages. Also, you can usually take a credit against your FUTA tax. The Circular E tells us that with the maximum credit (5.4%), the FUTA tax rate after the credit becomes .8%.
Our company is entitled to the maximum credit for all employees, so we will set up the formula based on the .8% rate.
The amount of FUTA paid for each employee will be the taxable gross times the rate (.8%). We must establish a value for each of these "variables"--the taxable gross and the rate (percentage)--for our calculation. The taxable gross, in this case, is the year-to-date limit, or the first $7000 we pay the employee.
Tip: To set up these variables, you have to know a little about the commands and syntax Sage 50 uses. Look up formula, tax table overview in the Sage 50 Help index. You can also get an idea of how to set up your formulas by opening one of the sample companies and looking at the formulas used there (under File, Payroll Formulas, User Maintained). Note that these, too, are just examples or starting places; it's up to you to verify their accuracy. But they should give you some ideas.
The function that we want to use to set the taxable gross variable is YTD_LIMIT. We look up this function in Help and find that this function must be expressed in this way:
YTD_LIMIT(Field, Expression)
The Help also tells us:
"During evaluation, the field and the year-to-date value of the field are both obtained. Then, the year-to-date value is compared with the expression. If the year-to-date value is less than or equal to the expression, the result of the YTD_LIMIT function is the same as the value of the field. If the year-to-date value is greater than the expression, then the amount by which it exceeds the expression is subtracted from the value of the field to give the result. If the amount by which it exceeds the expression is greater than the value of the field, the result is zero (0)."
So our "Expression"--the second argument in parentheses--would be 7000, the limit we obtained from Circular E for FUTA. (The semicolon signals the end of this function or command line.)
TAXABLE_GROSS = YTD_LIMIT (ADJUSTED_GROSS, 7000);
Tip: Beyond the fact that we need this amount for the FUTA calculation, there is another reason why we need to set the Taxable Gross. If the Appears on Payroll Tax Report Menus field is checked, this variable must appear on the left side of an equal sign in at least one equation, since this value is needed when printing the Payroll Tax report and the Exception report.
PERCENT=0.8;
ANSWER= -TAXABLE_GROSS * PERCENT%
The Answer variable must appear on the left side of an equal sign in at least one equation, because the ANSWER variable is used by Sage 50's Payroll system to calculate FUTA. The % symbol at the end divides the value of the PERCENT variable by 100.