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US Taxation - Supplemental Payment

Hi Friends,

We have an issue when supplemental payment (processing class set-up as supplemental payment for the wage type) is paid back dated in current period.

Retro amounts for supplemental payment is being taxed by getting added to regular wages although for current period the same supplemental period amount is taxed separately as supplemental payment.

Is there a rule or law that governs this behaviour for retro supplemental payments all tax authorities for retro amounts carried to current period or is this issue to be reported to SAP?

Example:-

Payroll process for regular wages (processing class set-up as regular payment for this wage type) correctly of $2500 for period 16.

Now in period 17, it was noticed that supplemtal payment of $1000 was missed out to be paid in period 16.

Entry was made for $1000 in period 17 dated back in period 16 on IT0014.

Period 17 now has regualr wages of $2500 and this supplemental payment.

Supplemental payment of $1000 difference amount coming in period 17 from period 16 from retro is taxed along with $2500 such that taxable gross for regular payment is $3500.

Supplemental payment of $1000 for period 17 is taxed separately on $1000 in current period.

Expert help or any pointers would be greatly appreciated.

Thanks,

Ameet

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