Master Company Setup: Multi Co Tax Setup
Multi Co Tax Setup (Multiple Company Tax Setup) is used in cases where a single FEIN (Federal Employer Identification Number) is shared by more than one company code. This allows an organization to decentralize their Payroll and Human Resources functions while their tax returns are consolidated under the common FEIN for filing purposes.
| Field Name | Information |
|---|---|
| Parent Company | The company setup of the Parent Company (Earnings, deductions, taxes) is used when tax returns are produced. By default, the Parent Company is set to the code of the company you are working in. Select the company code of the Parent Company from the Drop List. This must be set to the same company code on all companies that share the FEIN, even the Parent Company. |
| Aggregate Limits | Allows the system to check the Year to Date totals of all employees within the Multiple Company Tax Setup. This ensures employees do not exceed any taxable or deduction limits. This is done by employee Social Security Number. |
| Aggregate Tax Filings | Allows the system to produce one set of Tax Returns containing data for all companies with the same Parent Company setting. |
Setup Requirements and Guidelines
Multi Co Tax Setup is a very powerful tool designed to manage tax and taxing on a multi company code client. Individual company codes are identified as "children" to a "parent" company code and managed according to the setup of that parent. It is designed to observe and manage tax limits for one SSN paid on multiple companies within one parent.
Definition of Terms relating to Multi Co Tax Setup
| Field Name | Information |
|---|---|
| Enterprise | The collection of companies organized under Multi Co Tax Setup. |
| Parent | Single company that defines the functionality of all components of the enterprise. |
| Child | Component of the enterprise that is not the parent. This defines its relationship to the parent. |
| Sibling | Component of the enterprise that is not the parent. This defines its relationship to other children of the enterprise. |
| Parent Company | One of the most important pieces of setup required for the aggregate tax functionality is the "Master" or "Parent" company. One company code must be designated as the "Parent". This company can (and should) be a live company just like any others, with a few important considerations. |
Company Tax Setup
The parent company must have all of the tax codes, earning codes, and deduction codes that are setup on the other related companies. Furthermore, these codes must be setup exactly alike.
Example: Companies A, B, and C share the same Federal EIN. Company "A" is arbitrarily chosen as the "Master" or "Parent" company.
Company "A" is only in Pennsylvania. Company "B" is only in New York. Company "C" is only in New Jersey.
Company "B" will only have NY taxes.
Company "C" will only NJ taxes.
Company "A" must have every tax code setup in companies "B" or "C". The tax setup in Company "A" must match the setups from Company "B" and Company "C".
Company Deductions and Earnings
The scenario presented regarding taxes is also true for Company Level Deductions and Earnings Codes.
If company "B" has a section 125 health insurance deduction code of D-01, Company "A" must have the same deduction setup exactly the same way.
Company "C" can also have a section 125 health insurance deduction D-01. It MUST be setup exactly the same as Company "A" and Company "B".
Company "C" need not have the D-01 deduction code. If it does, it must be setup identically to the master company"A". The same is true for earning codes.
Recap: "Company A" must have the combined set of all codes (deduction, earning, tax codes) as all of the "child" companies, and these codes must not conflict anywhere in, for lack of a better term, the enterprise.
For each set of companies or enterprise, you must choose exactly one "Parent" company. You cannot setup a hierarchal structure of companies; all companies in the enterprise must have the same parent company. Lastly, the "Parent" company of the enterprise is marked with itself as the parent.
Additional Information
There is no error checking to ensure the company parenting is setup correctly.
There is no error checking to ensure codes present in the children are also setup identically on the parent.
There is no error checking to ensure codes setup on one child is also setup identically in all of the sibling companies.
Failure to properly manage the Multi Company Tax Setup can cause incorrect filings, tax withholdings, wages, and/or fatal and unclear errors when running payrolls or quarterly returns.