CA - Canada Legislation. Incorrect Value Calculated For Federal Supplemental Taxes While Doing Quick Pay For Retired Employee lump sum

(Doc ID 2369888.1)

Last updated on MARCH 06, 2018

Applies to:

Oracle Fusion Global Payroll Cloud Service - Version 11.12.1.0.0 and later
Oracle Fusion HRMS (Canada) - Version 11.1.11.1.0 and later
Information in this document applies to any platform.

Goal

On : 11.12.1.0.0 version, CA - Canada Legislation

Incorrect value calculated for Federal Supplemental Taxes while doing QuickPay for retired Employee

An employee has retired.
We have terminated the work relationship.
Now we are trying to do a QuickPay for lump sum amount of 50000. But the federal supplemental tax that is auto calculated is $1000 more than expected.

Example:
Below is my Federal tax calculation for Retiree Lump-sum payment of $50,000.

5% of first 5000 = 250
10% of next 10000 = 1000
15% of remaining 35000 = 5250

So Total Federal Tax Withheld should be = 6500

However its coming out as 7500 as highlighted in issue.

Reference Below from Canadian Govt. Website:
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/payroll/payroll-deductions-contributions/special-payments/lump-payments/withholding-rates-lump-payments.html

Withholding rates for lump-sum payments
Combine all lump-sum payments that you have paid or expect to pay in the calendar year when determining the composite rate to use.

Use the following lump-sum withholding rates to deduct income tax:

10% (5% for Quebec) on amounts up to and including $5,000;
20% (10% for Quebec) on amounts over $5,000 up to and including $15,000; and
30% (15% for Quebec) on amounts over $15,000.
 

Solution

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