Using SAP HR Tax Reporter

Every payroll or tax professional knows tax year-end can generate a large amount of stress during an already busy time of year. It seems several months can be devoted toward preparing for, living through and cleaning up after tax filing. Correct and efficient tax preparation eases the pressure of the tax season and leaves yourself, your employees and the government happy people. There are several things that can be done to ease the burden. Besides monitoring your employees’ tax data early, creating year-end checklists and attending year-end seminars, the SAP Tax Reporter functionality is advantageous in tax preparation during and at the end of the tax year.

Before taking a look at the year-end W-2 forms and magnetic media reminisce on a plausible situation. Suppose an employee was exempted from Social Security and Medicare in 1999 and should have been subject to the taxes. Fortunately, you were able to collect the tax from the employee. Now, it is necessary to complete a W-2c, 941c, 941 and Schedule B with the revisions. There is a tremendous amount of manual work in calculating and completing these forms. Cautiously, you ask at least two other people double-check your forms because it is even more tedious to correct a correction. The savvy tax professional will download the fill-in forms from the Internal Revenue Service’s website to avoid the antiquated typewriter. Even with tremendous care, there is opportunity for mistake in calculation or completion. Is there a way to eliminate some of this overhead?

This is one area where Tax Reporter can help. The idea behind Tax Reporter is to report on all the tax information stored in payroll clusters and third-party remittance tables so that it is readily available for tax reporting and filing. By reporting directly from the payroll tax clusters and remittance tables, some intermediate steps have been eliminated. The payroll or tax professional no longer needs to calculate or complete the forms. Because the data is readily available, forms can be produced on demand in test or productive form. Once run as a productive version, the form can be reprinted. If Tax Reporter had been run in 1999, the employee from the previous paragraph whose payroll results could be corrected will appear during a correction run. The W-2c and all other forms affected by the correction then can be printed.

Eliminating another step in totaling the deposits made to each government agency can reduce the chance for error. Your organization may track deposits in a spreadsheet, refer to the general ledger or vendor account or some other method in order to report the payments made during the tax period. Fewer calculations provide less opportunity for mistake. Also, if drawing deposit information from payments out of a general ledger or vendor account, it is necessary to pull the correct information. There may be incorrect entries in the account, or deposits may not be the only transaction types in the account. Tax Reporter draws on the actual remittance data for each tax authority, eliminating yet another tedious step in the preparation before the form is due.

If you have enough employees to warrant using SAP Payroll, chances are you are not aware of every adjustment to employees’ earnings each payroll. Perhaps you have distributed data entry areas and there was a change to an employee’s data that affected a previous tax year. How do you know this change took place? Because the prior year’s form and tax data is stored in payroll clusters, Tax Reporter can be periodically run to indicate any corrections. Even if Infotype 3 or the payroll control record is used to prevent retroactivity, there are cases when you need to allow an employee’s payroll to be calculated retroactively into the old calendar year. Tax Reporter can be used to see if there was a change to the employee’s tax data.

Again, with enough employees it may be difficult or tedious to track all changes to an employee’s W-2 information. Suppose an employee who received a 1998 W-2c requests a copy of his 1998 W-2 in 2000. A reprint of both the original and correction form can be created in the same place rather than having to copy paper or forms on microfiche.

PAYROLL-TAX REPORTER RECONCILIATION

Although calculation and production of the forms is very straightforward, reconciliation is still a key part to successful tax preparation. Because SAP is so complex, incorrect data entry can result in incorrect results. In addition, special circumstances will have to be handled in conjunction with the use of Tax Reporter. For instance, how does your organize handle uncollected Social Security and Medicare taxes? Also, any current year claims that have been repaid should be handled using non-authorized manual checks where the taxable gross has not been reduced due to insufficient “good money”.

The payroll reconciliation report queries payroll results and can show the differences between the payroll results and the results in Tax Reporter. It can also help identify special tax situations. For instance, SAP recommends that the payroll reconciliation report be run to show the current claims and then the claims report be run to show the detail to the claims. In addition, the payroll reconciliation report can be run to show unique situations like employees with /Ixx wage types or uncollected Social Security and Medicare taxes. Then these situations should be cleared up before year-end. Also, because forms like the 941 only report in total per quarter, the payroll reconciliation report can be run on the wage types used in the 941 to reconcile at the personnel number level. With this individual persons can be identified. Keep in mind that the payroll reconciliation report should be used rather than the wage type statement or tax type statement because it is more conducive to tax reporting. For instance, if the wage type statement were run on /701, it would report the taxable wages for all income tax levels (i.e. Federal, state and local). The payroll reconciliation report allows tax specific selection criteria and can be run over a range of time rather than only a single period.

Necessarily, Tax Reporter is complex and requires some configuration and user training. Because government forms and regulations may change from year to year, planning ahead is a key to integrating Tax Reporter into the W-2 season. Preparing Tax Reporter does not have to be a lonely job though. Year-end support is available from SAP or other organizations depending on the need. In addition to the HR support packages (formerly legal change patches), which update tables and processing based on legal requirements, SAP offers support and an opportunity for feedback. It provides year-end configuration training and the Year-End Angel program. Consulting firms such as Insight can also provide configuration training and support specifically geared toward year-end. After the W-2 season has ended but is still fresh in everyone’s memories, SAP hosts year-end focus groups to draw on its customers’ suggestions and needs. Many changes to Tax Reporter have resulted from the focus groups. Some developments that resulted from last year’s focus groups include enhancements to the Tax Reporter log and the configuration checker. The log will show differences from the original results and the payroll reconciliation report can be used to identify the changes. The configuration checker is intended to isolate common configuration errors before the tax reports are produced.

The days are gone sitting at a typewriter endless hours or individually preparing forms. Tax Reporter allows extra efficiency and accuracy in the calculation and production of forms. It provides a way to find tax data corrections. It also provides a complete package linking payroll data and tax forms. There is support available and prevailing requests for enhancements make their way to the end user. What more could the payroll professional need, except of course a real vacation during the W-2 season?