Detect the Effect of a Change in US Tax Models on Payroll — Before You Do It

  • by Clay Molinari, SAP HR Consultant, C&C Savant, Inc.
  • August 15, 2007
US users of SAP payroll periodically need to maintain their tax model configuration. A small change made in a tax model to correct a taxing situation may inadvertently alter the taxing for other situations. Ensure that mistakes don’t sneak into your SAP payroll.
Key Concept

Tax laws in the United States are quite complex. SAP uses tax models to determine which taxes are required on each type of earnings in each physical location for each type of employee. Tax models are almost as complex as the tax laws they represent and they can be difficult to analyze.

Tax models are an essential component of SAP payroll and therefore require acute attention and maintenance. Occasionally, companies need to modify tax models to comply with federal, state, or local tax regulations. One common pitfall users face when altering tax models is accidentally creating errors without realizing it. Because even the most extensive testing strategy may not reveal the unwanted side effect, you need to have a thorough understanding of all the linkages within a tax model for safe and reliable maintenance.

The information I’m providing about these linkages applies to all SAP releases from 4.0B and up. However, SAP ERP 2005 (ERP Central Component [ECC] 6.0) contains new reporting tools that improve your understanding of tax models. If you are not currently operating on ECC 6.0, you can still benefit from the information in this article. Refer to the last section “Custom ABAP Program Available for Download” to access a functionality similar to that offered by the new analysis tool in ECC 6.0.

Clay Molinari

Clay Molinari has 20 years of experience in the IT industry and has been working as an SAP HR consultant since 1997. He is currently president of C&C Savant, Inc., an SAP consulting firm that specializes in combining standard SAP configuration and custom ABAP programming to help its clients solve unique or complicated requirements.

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