CENTRAL SUSQUEHANNA INTERMEDIATE UNIT Application: Payroll Setting Up and Reporting OPT/LST Taxes Step-by-step Instructions 2012 Central Susquehanna Intermediate Unit, USA
Table of Contents INTRODUCTION... 1 THE MUNICIPALITY DIRECTORY... 2 OPT Tax Setup... 2 LST Tax Setup... 2 THE EMPLOYEE MASTER RECORD... 5 OPT/LST Setup... 5 OPT/LST Refunds... 5 OPT/LST Overrides... 6 OPT/LST Exemptions... 6 OPT/LST TAX COLLECTION... 7 OPT/LST During Processing... 7 OPT/LST in Check History... 7 OPT/LST TAX REPORTING... 8 OPT/LST Report... 8 OPT/LST Receipts... 9 OPT/LST Status Report... 10 2012 Central Susquehanna Intermediate Unit, USA
INTRODUCTION Reporting for OPT or LST tax is a process. The process begins with setting up codes, continues through setting up each employee and withholding the tax, and finishes with the actual reporting. This guide will cover the process from set up to using the reports that are available. In this instruction guide you will learn: The difference between OPT and LST. How to set up directories to collect both taxes. How to use the reports that are available to submit the information to your local collector. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 1
THE MUNICIPALITY DIRECTORY OPT Tax Setup The CSIU uses the term OPT for the one time deduction of $10.00 that is withheld from employees pay each calendar year based on the municipality where they work. To set up the information for a municipality and to deduct OPT (the $10.00 tax), enter $10.00 in the OPT/LST Amt field as shown above. If a minimum amount is desired to prevent withholding this tax unless the employee earns over a predetermined amount, enter that amount into the OPT Min field as shown above. Nothing else should be selected on this tab. If desired, collector information can be entered on the LST Tax Collector Information tab if it is different from the EIT collector. LST Tax Setup LST tax evolved from the EMST regulations that allowed each municipality to determine the amount of tax to collect each year from employees who worked within their municipality, up to a maximum of $52.00. When the assessed amount is greater than $10.00, the tax is to be collected in even installment payments based on the number of pays designated by each employer and is not to be collected as a one-time amount. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 2
In order to take this tax in multiple pays, select both the LST and LST Multiple checkboxes. The grid will then be enabled so you can enter the amounts needed. Employees who are paid 26 pays per year with a tax of $52.00 would be required to pay $2.00 per pay to meet the $52.00 amount. If your employees receive only 24 pays per year, the Amount per pay is $2.17 and deductions would stop at the $52.00 maximum. Employees with earning exemption certificates should be set up with a Municipality code that collects the tax after they have reached the $12,000.00 minimum. The example below shows how to set the low amount to start withholding when they reach this amount. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 3
If all employees must pay at least the School Minimum tax even if they have not yet reached the $12,000.00 minimum, then set up the Municipality code as shown in the option below. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 4
THE EMPLOYEE MASTER RECORD OPT/LST Setup After establishing the correct Municipality codes with the proper rates of withholding, identify the municipality in which each employee works by selecting it in the Twp Work field. When the payroll is processed, the amount of tax associated with the Municipality code will be collected. OPT/LST Refunds If a deduction for OPT was taken and the employee already paid the tax, select the OPT/LST Refund checkbox and the tax will be returned to the employee in the next paycheck. The Twp Work field must retain the township in which the employee works, as shown below. Because OPT is withheld only once per calendar year, nothing else needs to be done to prevent withholding this tax again during the same calendar year. However, because LST is withheld over multiple pays, when refunding LST the Twp Work code must be entered and then updated on the EMPLOYEE MASTER record; if the code is not changed, or if the Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 5
employee is not exempted from LST, the deduction will be withheld again in the next payroll. If a refund is needed for LST, after the refund is processed the appropriate changes must be made to the employee s Tax Info tab to identify how this tax should be treated for future pays. OPT/LST Overrides When an employee starts employment after the first pay of a calendar year, you need to find out if OPT or LST was already withheld by a prior employer. If OPT is collected and if the $10.00 was satisfied through prior employment, the tax should not be taken again in the same calendar year. Assign the employee a Municipality code with no withholding. If LST is collected and deductions were taken through prior employment, in the Max amount field enter the remaining tax to be deducted for the calendar year. As long as the Twp Work code Maximum is higher, the Max amount will limit the withholdings to the amount entered instead of the amount indicated by the municipality identified in the Twp Work field. At the start of the new fiscal year all override amounts should be removed. OPT/LST Exemptions Exemptions are available for LST. Employees who have served in any war or armed conflict and were honorably discharged, who were disabled due to service, or who were called to active duty at any time during the taxable year can file for an exemption. Employees who earn less than $12,000.00 per year are also eligible for a low earnings exemption and should file for an earning exemption certificate. Employees with the earnings exemption or one of the service exemptions do not pay this tax. However, they do need to file for the exemption each year. To identify employees who are exempted for military service reasons, select the LST Exempt checkbox as shown above. Employees who are exempted due to the low earning exemption should NOT be identified by a checkmark in the LST Exempt checkbox. Rather, select a Municipality code in the Twp Work field to begin deducting the LST tax when their earnings reach $12,000.00. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 6
During payroll processing, employees without prior LST payments who reach $12,000.00 in earnings and are not designated as LST Exempt will be listed on an exception report when generating the Pre Payroll Totals report. Employees listed will have deductions for LST withheld on their next payroll and you should calculate and begin taking a catch-up amount by entering the appropriate amount into the override Amount field for one pay. When entering an override Amount, remember to remove it after the payroll is completed or it will be withheld again from the following pays up to the Maximum amount. OPT/LST TAX COLLECTION OPT/LST During Processing During payroll processing, on the PROCESS PAYROLL > SUBMIT PAYROLL/PAYROLL SUBMIT PARAMETERS record a selected Take OPT/LST? checkbox identifies if the tax is to be withheld. If that checkbox option is selected, employee records are evaluated to see if amounts should be withheld based on the Twp Work code, overrides, refunds, or exemption criteria as mentioned earlier. If an employee who is not designated as LST Exempt reaches the $12,000.00 amount and the tax has not yet been withheld, a report will be generated to indicate employees who should start paying the tax. OPT/LST in Check History UPDATE SCREENS > CHECK HISTORY CHECK HISTORY stores all of the details associated with each payroll check and direct deposit, including refunds. This information is used during payroll processing to withhold OPT/LST and to verify that amounts are not being exceeded. Refunds can only be granted for employees who have had OPT/LST withheld in the current year; the full amount of the deduction is refunded. The available reports are all generated based on CHECK HISTORY information and whether the option is selected to include OPT/LST refunds. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 7
OPT/LST TAX REPORTING OPT/LST Report REPORTS > PERIODIC > OPT/LST REPORT/FILE This report lists employee name, address, employee ID or Social Security number (if selected), check number, check date, and amount of OPT or LST deduction and will include refunds if that option is selected. The report is sorted by municipality and totals are included. A grand total displays on a separate page. Voided checks are not included on this report. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 8
OPT/LST Receipts REPORTS > MISCELLANEOUS > OPT/LST RECEIPTS The OPT/LST RECEIPTS menu item allows you to generate tax receipts for all Occupational Privilege Tax (OPT) and Local Service Tax (LST) deductions taken within the date range entered. OPT and LST refund receipts can also be generated using this option. OPT and LST receipts are printed three per page. It is recommended to use pre-perforated, plain paper forms. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 9
OPT/LST Status Report REPORTS > MISCELLANEOUS > OPT/LST STATUS REPORT The Occupational Privilege Tax Status Report lists employees with Occupational Privilege Tax (OPT) and Local Service Tax (LST) exceptions in the specified time frame. Exceptions include: no OPT or LST withheld, OPT or LST refunded, or no municipality specified in the Twp Work field on the Employee Master/Tax/EIC Info tab for the employee. For each employee with an OPT or LST exception, the report displays name, employee ID or Social Security number (if selected), township work, tax amount withheld, refund amount, and a description of the exception. In addition, employees designated as LST exempt are indicated by a "T" in that column on the report. Use this report to evaluate employees at the beginning of the calendar year to verify exemptions and refunds processed in the prior year. Revised: 08/09/2012 2012 Central Susquehanna Intermediate Unit, USA Page 10