An Answer to Multi-state Payroll Complexities in Microsoft Dynamics® GP

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I recently had a partner send me the following situation:

“I have a customer going live on GP Payroll and we ran into an issue with an employee that needs to pay State Tax to two states. I have both states set up, however, GP will only calculate tax for whichever state is in the Default on Transaction State in Tax Information in Employee setup info. I searched online to see if there is any solution and cannot find any info. Any assistance would be greatly appreciated.”

Knowing that this is an ongoing challenge, I thought I would share a little insight into this issue. There can be a lot of complexities with multi-state payroll, some of which Microsoft Dynamics® GP can handle, some it cannot. In a situation where you have a single dollar of wages that is taxable for two states, Dynamics GP does not handle this situation, unless the second state is New York. This is especially true when thinking about reciprocity between states, or the lack thereof. There is specific code to handle New York state tax requirements (note the “Withhold New York State Tax Difference” on the Employee Tax Maintenance window). Dynamics GP does handle situations where you have some wages that are subject to tax in one state and other wages subject to tax in a second state. The system uses the “Tax Withholding State” from the Employee Tax Maintenance window as the default when transactions are created in the Payroll Transaction Entry window, but this can be overwritten manually. For automatic transactions (e.g. Salary), you have to create a “Reallocate” transaction in Payroll Transaction Entry and change the State tax code. For what it’s worth, we have done a lot of special customizations to handle state tax, especially when it comes to specific reciprocity issues between certain states. I hope this helps guide you down the correct road when dealing with state tax issues in Dynamics GP.

By Tom Franz | Product Manager at Integrity Data

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