Non-resident De Minimis withholding calculation criteria
We have news about the De Minimis calculation criteria for non-resident De Minimis withholding in Utah, North Dakota and West Virginia.
BSI’s TaxFactory 11 Regulatory Bulletin 079 and 082 added support for Withholding De Minimis calculation criteria based on the number of days a non-resident employee works within the State for North Dakota and West Virginia, both effective January 1, 2022, and for Utah, effective January 1, 2023.
Want to know more about it? Keep reading.
Number of days worked in a nonresident state
To use the new De Minimis calculation criteria, BSI requires that you send the number of days worked in a non-resident state through the Current Pay-Period Nonresident Days Worked (PND) and Year-to-Date Nonresident Days Worked (YND) parameters.
So, let’s understand the use of those parameter, we are working with 4 of them:
- Period-To-Date Nonresident Days Worked (PND)
- Year-To-Date Nonresident Days Worked (YND)
- Month-To-Date Nonresident Days Worked (MND)
- Quarter-To-Date Nonresident Days Worked (QND)
The PND parameter is filled through the Total number of workdays (TWDAY) field of the nonresident record in the payroll processing Tax proration table (HRPAYUS_TAXPR). The TWDAY field is filled with the number of days from the employee’s Personal Work Schedule (PSP) where the number of worked hours is greater than zero.
In each period, the Nonresident Days Worked (/TWD) technical wage type is created with the number of days sent to BSI through the PND parameter.
The source of the YND parameter is the number of days cumulated through the /TWD wage type in the Cumulated tax results (HRPAYUS_TCRT) payroll table. That also applies to the MND and QND parameters.
Even though BSI only requires the PND and YND parameters, the MND and QND parameters are also sent.
Okay, and what else do you need to know?
In addition to these parameters, to use the De Minimis calculation criteria, BSI requires you to send the Employment Type (EP) parameter with value 1 – Mobile Workforce Employee.
You can set the value of the EP parameter in the BSI Employee Type Indicator (10EET) feature. For more information, check system documentation.
Besides the existing feature, the new BAdI Definition for BSI Employment Type Override (HRPAYUS_B_BSI_EMPLOYMENT_TYPE) Business Add-In was created to allow the override of the EP parameter.
Check out SAP Note 3260101 – TAX: De Minimis number of days worked criteria for nonresident state withholding for more details.
Frequently Asked Questions (FAQ)
Here are some questions that may help you as well.
1. Can I do all the De Minimis threshold management using only the 10EET feature?
The 10EET feature was not designed to support De Minimis. However, we cannot exclude that for certain non-resident states the feature could be sufficient. The HRPAYUS_B_BSI_EMPLOYMENT_TYPE BAdI definition was designed to allow customers to customize their system for their De Minimis needs.
2. How does the payroll program know the threshold is met for different states (IL, LA, MN, ND, SD, UT, and WV)?
The BAdI definition is based on the data points needed for recent changes for UT, WV, and ND. But the BAdI interface was intentionally kept more flexible so that implementations for other states can be built.
3. The Announcement of Legal Change and the SAP Note mention only the Utah, West Virginia, and North Dakota states, what about the other states?
For other De Minimis states, you may use 10EET feature or the HRPAYUS_B_BSI_EMPLOYMENT_TYPE BAdI to set EP parameter as 1 or 0 based on your business requirements.
4. BSI says we should set EP parameter as 1 in order to monitor De Minimis thresholds, how do we do that?
You may use 10EET feature or HRPAYUS_B_BSI_EMPLOYMENT_TYPE BAdI to set the EP parameter as 1 based on your business requirements.
5. BSI says we should set EP parameter as 0 when employee crosses thresholds, how do we do that?
You may use HRPAYUS_B_BSI_EMPLOYMENT_TYPE BAdI to monitor the state-specific threshold and set the EP parameter as 0 based on your business requirements.
6. What if I have configured both the 10EET feature and the HRPAYUS_B_BSI_EMPLOYMENT_TYPE BAdI? What happens in that case?
During payroll processing, HRPAYUS_B_BSI_EMPLOYMENT_TYPE BAdI is called after 10EET feature, so it may override the information previously set by the feature. Please be mindful of this when customizing the feature and the BAdI for your business requirements.
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All the best, and happy reading!
User Assistance Developer
Thanks, Lea! This was helpful.
Just a note that the De Minimis for North Dakota and West Virginia is effective January 1, 2022 as mentioned in BSI bulletin 82. De Minimis for Utah is effective January 1, 2023.
Thanks for your feedback, Mitesh!
Yes, I'll clear that up.
Can you help me what tax calculation method system will use for calculating the taxes using De Minimis method.
Right now, I see that system is adding wages from previous period with wages from current period and calculating taxes with regular method.