About Tax Levels

Tax Levels are used inSage HRMS Payroll to determine which earnings and deductions and which other taxes can be included in the calculation base for each tax, as well as the order in which the calculation should occur. In order for an earning to be subject to a specific tax, the earning's level must be lower than the level of the tax. In order for a deduction to be taken from pay before a particular tax is applied to earnings, the deduction's level must be lower than the tax's level. Essentially, levels determine the order in which earnings/deductions and taxes are calculated.

The default tax level provides for normal cases when you want most income to be taxable and some deductions to be taken before the tax is calculated.

The system assigns all taxes a level of 20 by default. You can edit the level of any tax, entering any number between 1 and 999.

When levels must be considered

Taxes are based on hours worked or wages earned and amounts deducted from pay. So, taxes use other earnings/deductions in their calculation bases. The levels of these taxes must be higher than the earnings/deductions used in their calculation bases.

Taxes using the calculation methods Flat, Amount per Hour, Percentage of Base, and Tax Bracket Table are based on hours worked or wages earned and amounts deducted from pay. So, these taxes use other earnings/deductions in their calculation bases. (In the case of Flat taxes, the calculation base is maintained as a way of tracking taxable wages and not for the purpose of calculating the amount of the tax.) The levels of these taxes must be higher than the earnings/deductions used in their calculation bases.

When levels can be low

Taxes based on the employee tax deduction are not based on amounts earned or deducted from employee pay. In other words, these taxes do not use other earnings/deductions in their calculation bases.

Taxes with the calculation methods Percentage Of Another Tax and Percentage Of Employee Contribution are not based on amounts earned or deducted from employee pay. In other words, these taxes do not use other earnings/deductions in their calculation bases.