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Additional Tax for Employee

Leanne_7663246

I have just had an employee resubmit their tax file declaration after working with company for 1 year. They previously had selected to Claim to the Tax Free threshold. They no longer wish to claim this as they have another job in addition to working with us. I know that I just need to update Reckon from 2- TFT to now 1-No TFT. However they have also selected an additional 5% to withhold. I have never done this before. Is it as simple as putting 5% in the extra tax box in their profile. See attached highlighted picture.

Any help appreciated

Additional Tax.jpg

Accepted answers

All comments

Acctd4

Hi @Leanne_7663246

Yes, that’s all you need to do 😊

Leanne_7663246

Thanks Shaz.

Oh and thank you for always answering my random questions. You are very quick, you must never sleep:)

Leanne_7663246

Sorry back again. I went to put the 5% into the Extra tax bit and it said percentages not allowed. I put 5 but does that mean it is going to deduct extra 5% or just $5

5% extra tax.jpg

Acctd4

Haha … I’ve just got up & happened to see your post come through (but am going to back to bed - It’s too early for me as I didn’t check your screenshot well enough 🤦🏻‍♀️😂)

You’re quite correct - As long as it’s in the Tax % box at the bottom, it will deduct that percentage. If you enter in the Extra Tax box, it will deduct a $ amount.

Leanne_7663246

Thanks Shaz, yes way to early for you to be up answering questions, go back to bed and enjoy sleep in:)

Kris_Williams

no the % box isn’t working for me, the tax code is probably overriding it. I haven’t got time to experiment at the moment but I have tried this before and couldn’t work out how to make extra tax a %

Leanne_7663246

Thanks Kris, I put the 5% in the tax box and was going to check when I did the pay run. I was worried it wasn't going to work. If anyone else has any suggestions on how to make the 5% automatically work that would be great. I don't want to manually do it each payrun.

Acctd4

Oh dear … I shouldn’t answer posts when my brain’s not fully awake yet 🤦🏻‍♀️😂

@Kris_Williams is right - The Tax % is for a flat % amount ONLY (not additional) & is commonly used for Working Holiday Makers - in conjunction with the 8-NoTaxC code - who are taxed at a specific flat tax rate.

There are only 2 possible workarounds that I know of that may work:

If the employee earns the same every pay, you can determine what an extra 5% of their usual PAYG Tax amount actually is & enter that extra amount in the Extra Tax box.
If you can determine what the employee’s marginal tax rate is overall, you can calculate an extra 5% & add the (pro rata) amount in the Extra Tax box

(The 2nd option may not be very accurate though as the marginal rate can change, depending on earnings)

Is there a reason why the employee has specifically requested a percentage rather than a $ amount ? 🤔

Leanne_7663246

Thanks Shaz,

Employee is casual and hours vary each fortnight which makes it hard. I don't know the specific reason they want 5%. I think he just wants to make sure he doesn't get a big tax bill. Its the first time I have been asked to do extra tax like this in over 20 years so its new to me. I might ask him to give a $ value instead.

Acctd4

Yeah, I would ask him. It's unusual for an employee to request additional tax as a percentage rather than a set amount. If he's crunched the numbers himself, he may well be able to give it to you as a converted $ amount, based on his own calculations 😊

Bruce

Shaz's experience that most people ask for an additional $ amount rather than a % is the same as mine.

However, I have had an instance of where someone that they needed to request the additional % because they thought they had to do this to cover a HELP - not realising that the system does it automatically for them.

Leanne_7663246

Thanks everyone for your help. I checked with the employee and his request for the additional 5% tax was only so that he didnt get a tax bill at EOFY. I explained that Reckon doesnt have the ability to do this. He was happy with this.

Kris_Williams

Glad you’ve got it sorted, you’re welcome, there are a lot of knowledgeable people here so always a good place to start

Eric Murphy

I have to say, this was a really helpful and constructive post and I most certainly learned something new.

Thank you to the Community members

Acctd4

Great to hear @Eric Murphy !👍🏻😊

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