SAP Gross Up Calculation - state taxation
Currently, I noticed SAP does a separate calculation for the gross up supplemental wages in USTAX and then does a calculation on the
regular wages if they are being paid together. We are having hard time when it comes to the states that does not offer a flat rate supplemental wages (ex: MA).
For example an EE recieves a $100 payment that is to be grossed up along with his salary of $500. In USTAX the system will calculate the gross up (using the regular method, factoring the exemption) on $100 along with the taxes and then it will calculate the taxes on the $500. We were confirmed this is not correct as we would end up not grossing up enough for our EE. The correct way is to calculate the gross up using the marginal rate that the EE falls under.
Can anyone offer any guidance on which way is correct? If we need to correct the current system functionality, how can we do that?