By Natara Beaurem
Your payroll implementation consultant has warned you about multi-Js. What exactly is a multi-J? The term multi-J means multiple jurisdictions. Multi-J identifies employees who have lived in two different states within a calendar year. We explore how this situation could impact your payroll implementation.
As of January 1st, employee X lives in Georgia; in July, the employee moves to Maryland. This employee would be considered a multi-jurisdiction employee. Many employer don’t think much about this process as it occurs. For some organizations, this is a regular occurrence. However, the accurate setup of these employee records is critical in your new HCM system.
Multi-J can affect your Employee Records
One of the essential tasks in an implementation is the process required to ensure accurate employee records. We understand that customers are faced with a long list of details that need their attention during the implementation process—one of the often overlooked tasks are multi-J’s employee record setup. In my experience, multi-J is one of the least considered tax implications during implementation.
When organizations look to switch their HCM systems, a topic often overlooked is that of multi-J employees. Many organizations don’t have the capabilities of accurate reporting that can identify multi-J employees. However, during the implementation process, these employees need to be identified and additional steps taken to ensure their year-to-date balances are set up correctly in their employee record.
The accurate setup of these employee records will be a milestone to celebrate. Neglecting these steps can cause some of the most severe employee record issues. It is critical to identify the affected employees and implement their balances correctly.
Accurate Balances are a Key Success Factor
During the implementation’s initial data load, the team reviews your employee demographic data and year-to-date balances. Generally, you will see those balances summarized by the states where the employee worked in the past calendar year. Further review is required to ensure that this is an accurate representation of where those employees’ wages were accrued. To identify this, you will need to review the employee wages summarized by each tax code. This breakout for their opening and final balances will properly identify, by state, their earnings and deductions.
An Example: Employee moves from Georgia to Maryland
Let’s go back to my previous example; you have an employee who lived in Georgia for a portion of the year and currently resides in Maryland. During the initial data load, the employee balances will be in a format like this:
|INITIAL EMPLOYEE BALANCE|
|REGULAR: 1,200 hours|
|PTO (Personal Time Off): 80 hours|
|Bonus Paid: $5000|
|Overtime Hours: 96 hours|
|Federal Income Tax: $8000|
|GA State Taxes: $1800|
|MD State Taxes: $750|
|MD Local Tax: $60|
|Social Security: $1860|
|Medical Benefits: $435|
If you notice, the balance has both Georgia and Maryland state taxes listed, identifying that the employee has paid taxes in two tax jurisdictions. To ensure the employee balances are loaded into the system correctly, your HCM system must identify where those earnings were accumulated. Typically you can expect the data will look like the following:
|REGULAR: 1,000 hours||REGULAR: 200 hours|
|PTO (Personal Time Off): 80 hours|
|Bonus Paid: $2500||Bonus Paid: $2500|
|Overtime Hours: 96 hours||MD Local Tax: $60|
|Federal Income Tax: $7500||Federal Income Tax: $500|
|GA State Taxes: $1800||MD State Taxes: $750|
|Social Security: $1500||Social Security: $360|
|Medical Benefits: $350||Medical Benefits: $85|
Watch for W-2 Errors
Many times, multi-Js are identified when the customer loads their initial and final balances. Following the data load, a quality assessment of the data may uncover these YTD balances in multiple states for an employee. If those multi-J data fields are provided during the initial load and the customer is in their go-live status, this can now cause some issues of concern that require correcting. During the go-live status of your project, you are no longer dealing with test data; you now have “live” data.
The best way to make updates after the go-live stage of the implementation would be to perform manual adjustments to the employee record. The Implementation team or client team member must edit each multi-J employee record and correct the data. This adjustment would include identifying the opening balance check, reversing the check, and manually re-entering the wages data into the employee record; one record for each state, essentially two additional opening balance checks would show for the employee. Accurate adjustments to the employee record are critical. If incorrect, there is a potential error in the employees’ IRS Wage and Tax Statements (known as a W-2 in the U.S.).
If the production of the W-2s is completed before the erroneous multi-J balances are discovered on the employee records, Corrected Wage and Tax Statement Forms (known as a W-2C) would have to be issued by the company for each employee affected after the completed manual balance adjustments.
Manual Adjustments are Risky
Adjustments can take a minimum of 30-60 mins per employee per record, depending on the data included on the check. If there are multiple employees, it is best to rectify this during the initial data load since the data can be mass updated. If there are multiple employees, this can be a very time-consuming manual process with a more significant opportunity for error.
While gathering the data for multi-J employees is not the most critical process, if provided early in the project, you will have a greater chance of alleviating adjustments, reducing risk, and potentially avoiding manual errors.
Best Practices During Implementation
Follow these best practices for employees with multiple jurisdictions:
- Understand if your organization has employees in multiple tax jurisdictions.
- Ensure that you have reporting that would capture any jurisdiction moves and be able to provide a breakout of their wages by tax code.
- You will also want to ensure that you have taxable wage reporting that breaks out each employee’s taxable wages. This report will allow for a smooth analysis by the tax team. This forward-thinking approach will alleviate having to make manual adjustments during the critical go-live window.
Once you know you have these processes in place to take care of multi-J records, you will allow yourself more time to focus on learning your amazing new HCM system. And less time worrying about manual adjustments.
Learn more about HRchitect Implementation services and request a consultation today.
About the Author
Natara Beaurem is an experienced HCM Consultant with deep expertise in various HCM and payroll systems. As a proactive and hardworking team player, Natara brings a focused mentality and rigorous approach to her
Client engagements. Natara is a strong and experienced implementation leader with a proven track record of success in the HCM software industry. She is adaptable, driven, and has the ethics and ability to thrive within a team or individual setting. Natara’s expertise spans industries and software platforms.
To learn more about Natara, check out her LinkedIn profile here.