Gross to net Payroll Engine USA

G2N Nova is the premier Gross-to-Net Engine USA, offering 100% accurate payroll calculations across all 50 states and 100+ countries. Operating in real-time on a unified platform, it ensures data privacy by not accessing employee-identifiable information.

Request a demo today to see how it transforms payroll operations!

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Gross to net payroll tax engine for USA

Looking for the latest payroll tax updates in the USA? Powered by G2N’s Payroll Tax Engine USA, our cloud-based platform delivers real-time, automatic updates customized for U.S. payroll requirements.

• Keep using your existing HCM, ERP, or WFM software without transitioning to a new payroll system.
• Partner with a provider offering a seamless, plug-and-play solution designed exclusively for payroll tax updates.

Solutions

• HCM/ERP/WFM Systems: G2N integrates seamlessly with all major HCM, ERP, time, pay, and attendance systems in the USA, allowing businesses to continue using their existing infrastructure without interruption.
• System Integrators: G2N enhances platforms with cross-border payroll functionality, enabling integrators to offer customized, seamless payroll solutions.
• Enterprises: Streamline payroll with G2N’s unified platform, saving time and ensuring accuracy with tools like the Payroll Calculator USA and Salary Calculator USA.
• SMEs: G2N scales with your business, providing real-time, accurate payroll processing for businesses of all sizes.
• Service Providers: Deliver exceptional value with G2N’s efficient payroll platform, trusted by top global companies.

How It Works

Input

• Employee Data: G2N Nova collects essential employee details such as compensation, benefits, and personal information.
• Leave: Tracks and processes employee leave, absences, and time-off.
• Time & Activity: Monitors employee work hours, attendance, and overtime.

G2N Nova Process

• Country Level Filing: Integrates with statutory authorities for accurate filing and reporting according to country-specific tax and social security regulations.
• Country Level Regulation: G2N Nova ensures full compliance with local payroll rules, supported by an in-house compliance team.
• Global Payroll Engine – Gross to Net Computation: The engine calculates gross-to-net payroll for employees, ensuring accurate pay and deductions in real-time.

Output

• General Ledger (GL): Provides detailed financial entries for accounting and reconciliation.
• Treasury: Generates reports for cash flow and treasury management.
• Bank File: Creates bank files for payroll payments and other transactions.
• Payslip: Delivers detailed pay slips showing deductions, taxes, and net pay to employees.

G2N Nova is built for flexibility, scalability, and compliance, offering a streamlined and secure solution to process payroll with ease across the USA and globally. It ensures smooth integration with existing systems and offers a real-time, transparent payroll experience for businesses and their employees.

Features of G2N Payroll Engine USA

Benefits

• Streamlined Payroll Processing: Fast, accurate, and efficient payroll processing, fully compliant with U.S. tax and labor regulations.
• Seamless Inbound and Outbound Integrations: Effortless integration with U.S.-based payroll and HR systems, minimizing errors.
• Eliminate Manual Data Extraction: Automates data extraction, saving time and reducing human error.
• Multi-Country Payroll Capabilities: Manage payroll across multiple countries, ensuring local compliance.
• G2N Payroll Engine USA: Achieve secure, compliant payroll processing for both domestic and international operations.

Everything you need to know about gross to net calculation in the USA

The gross-to-net salary calculation is essential in determining an employee’s take-home pay in the USA. It begins by deducting pre-tax contributions, such as retirement plans or health insurance, from gross earnings. Then, applicable federal, state, and local taxes are withheld based on the employee’s earnings and tax filing status. Post-tax contributions, such as voluntary benefits or savings, are subtracted next, followed by any wage garnishments, like child support. Finally, the net income is determined after all deductions are applied. This process ensures accurate, compliant payroll calculations. Ready to simplify your payroll in the USA? Contact us to learn how G2N can help.

Withholding Taxes Overview

The following list outlines various types of withholding taxes and deductions that are applied to an employee’s paycheck. These taxes and deductions will be explained in further detail later in the content:

• Federal income tax withholding
• FICA withholding
• State and local tax withholding
• State and local income tax
  • State unemployment tax (SUTA)
  • Short-term disability
  • Paid family medical leave
• Benefit deductions
• Wage garnishments

Each of these components plays a critical role in determining the total amount withheld from an employee’s gross earnings and ultimately impacts their net income.

Pay Stub – Payroll Output

A pay stub is a document provided by an employer detailing an employee’s earnings and deductions for a specific pay period. It serves as a clear record of income, taxes, benefits, and other deductions, helping employees understand how their net pay is calculated.
The sample pay stub output generated by the G2N Payroll Engine includes the following:

Key Pay Stub Information

These components provide a comprehensive breakdown of an employee’s pay and deductions for transparency and record-keeping.

Adjusted Gross Income (AGI)

Adjusted Gross Income (AGI) is the total income you earn from various sources, such as wages, business income, and retirement earnings, minus certain adjustments like contributions to retirement plans or student loan interest. AGI is used to calculate taxable income and determine eligibility for tax deductions and credits.

Modified adjusted gross income (MAGI)

MAGI is a key figure used to determine eligibility for specific tax benefits, credits, and deductions. It begins with your Adjusted Gross Income (AGI), but some deductions are added back to arrive at the final amount. The way MAGI is calculated depends on the tax benefit you are applying for, and it is crucial for determining things like IRA deductions, Child Tax Credit eligibility, and exclusions for income such as savings bond interest.

The Role of AGI and MAGI

Both AGI and MAGI are important figures in your tax return, as they directly impact the amount of taxes you owe and the tax credits or deductions you qualify for. Understanding and calculating these figures accurately can help ensure you maximize your potential tax savings.

Employee Classifications

Employee classifications define worker status and eligibility for benefits and compliance with labor laws. Key classifications include:

• Full-Time: Works 35-40 hours/week, receives benefits, and may be exempt from overtime.
• Part-Time: Works fewer than 30 hours/week, may qualify for benefits, and eligible for overtime.
• Contract: Hired for a specific period, with varying hours and compensation.
• Independent Contractor: Self-employed, flexible hours, no benefits.
• Temporary: Short-term roles, often hourly, eligible for overtime.
• On-Call: Available during specified hours, eligible for overtime.
• Volunteer: Unpaid, flexible hours, not covered by FLSA.

Understanding these helps navigate job opportunities and expectations.

Benefit Deductions

Benefit deductions are an essential tool for lowering taxable income, which can reduce the amount of taxes owed. These deductions allow employees to pay for services like health insurance, dependent care, and retirement savings using pre-tax or after-tax dollars, depending on the benefit type. Here’s a breakdown of common benefit deductions:

Medical

Medical deductions allow employees to reduce taxable income by deducting qualifying medical expenses, such as health insurance premiums, treatments, and medications. These expenses are deductible if they exceed 7.5% of your adjusted gross income (AGI) for 2024, helping to offset healthcare costs.

Dental

Similar to medical expenses, dental costs such as checkups, fillings, and orthodontics can be deducted if they exceed the 7.5% AGI threshold. This can provide relief for those who face significant dental expenses not covered by insurance.

Vision

Expenses related to vision care, including eye exams, glasses, and contacts, are deductible under the medical expense category, subject to the 7.5% AGI threshold.

Healthcare FSA (Flexible Spending Account)

A Healthcare FSA allows employees to contribute pre-tax dollars to pay for medical expenses like copays and prescriptions. However, FSA funds are typically use-it-or-lose-it, so careful planning is essential.

Dependent FSA

This account helps employees pay for dependent care, such as daycare, using pre-tax dollars. It can reduce taxable income but also operates on a use-it-or-lose-it basis.

HSA (Health Savings Account)

An HSA allows individuals with high-deductible health plans to save pre-tax dollars for medical expenses. Contributions are tax-deductible, earnings grow tax-free, and withdrawals for medical expenses are tax-free.

Retirement

Contributions to retirement plans like a 401(k) or IRA reduce taxable income and offer tax-deferred growth, providing both immediate and long-term tax benefits.

Types of Wage Garnishment

• Child Support: The most common type.
• Creditor Garnishments
• Bankruptcy Orders
• Student Loan Payments
• Tax Levies
• Voluntary Wage Assignments

SDI/VDI/Employee SUI

State Disability Insurance (SDI), Voluntary Disability Insurance (VDI), and State Unemployment Insurance (SUI) are essential programs that provide financial support to workers facing temporary disability or unemployment. These programs aim to alleviate the financial burden during challenging times.

• State Disability Insurance (SDI): SDI is a state-run program that provides short-term financial assistance to workers unable to work due to non-work-related injuries, illnesses, or disabilities. It is funded through payroll taxes, with contributions typically shared between the employee and employer. Available in states like California, New Jersey, and New York, SDI benefits replace a portion of wages for a limited time and are assessed based on recent earnings.
• Voluntary Disability Insurance (VDI): VDI is a supplementary program that offers income replacement if an employee cannot work due to illness, injury, or maternity leave. Commonly offered in California, it provides a percentage of an employee’s base salary for up to 52 weeks. VDI is typically employee-funded and complements state disability programs.
• State Unemployment Insurance (SUI): SUI is a tax-funded program that offers financial assistance to workers who lose their job through no fault of their own. Employers pay SUI taxes, and workers must actively seek new employment to qualify. Benefits are calculated based on prior earnings, with maximum weekly amounts determined by state regulations.

FUTA – Federal Unemployment Tax Act

The Federal Unemployment Tax Act (FUTA) imposes a payroll tax on businesses that employ workers, with the proceeds supporting unemployment benefits across the country. This tax, which is exclusively the responsibility of employers, funds the federal unemployment insurance system, offering vital financial assistance to those who lose their jobs through no fault of their own.

FUTA Tax Structure and Responsibilities

The FUTA tax rate stands at 6%, applied to the first $7,000 in wages paid to each employee annually. Although it is based on employees’ wages, the tax burden falls entirely on employers, not workers. This means that the FUTA tax is not deducted from an employee’s paycheck.

FUTA is designed to fund unemployment compensation and other workforce-related services. Though FUTA operates at the federal level, each state may have its own unemployment insurance system, contributing to the overall structure. Employers who pay into their state’s unemployment fund can qualify for a credit of up to 5.4%, effectively reducing their FUTA tax rate to 0.6%.

Courtesy Withholding

When employees reside in one city but work in another, they may face the obligation of paying local taxes for both locations. In this scenario, employers can offer a helpful service called courtesy withholding, where the employer collects and remits local income taxes on behalf of the employee, eliminating the need for employees to pay taxes separately to multiple jurisdictions.

Local Services Tax (LST)

The Local Services Tax (LST) is a tax imposed on individuals working within specific local jurisdictions, typically collected quarterly. The amount is prorated based on the number of pay periods in a year.

How LST is Deducted

If the LST rate exceeds $10, it is deducted weekly at $1 per week. In regions under Act 199, deductions may be higher. For areas with a rate of $10 or less, the tax is generally collected as a lump sum.

Who Pays the LST?

• Employees: Workers within a taxing jurisdiction are required to pay the LST based on their time worked in that jurisdiction.
• Self-employed individuals: They are responsible for paying the LST directly on a quarterly basis or in a lump sum if the rate is $10 or less.

Exemptions from LST

• Income Thresholds: Individuals earning less than $12,000 annually (or $15,600 in high-rate areas) may be exempt.
• Veterans and Active-Duty Service Members: Those with permanent disabilities from military service or active-duty reservists are exempt.

Refunds and Exemptions

If excess LST is deducted, a refund can be requested. Low-income exemptions apply in certain areas but may not cover the full tax amount, such as for school districts.

JEDDs vs. JEDZ

Ohio’s complex tax landscape, with its various state, municipal, and school district taxes, has led to the development of innovative methods for local governments to share services and increase efficiency. Among these methods are Joint Economic Development Districts (JEDDs) and Joint Economic Development Zones (JEDZs), both designed to foster economic growth but with distinct structures and purposes.

JEDDs (Joint Economic Development Districts)

A JEDD is a collaborative effort between municipalities and townships aimed at developing township land for commercial and industrial purposes. The concept was introduced in 1993, and today, nearly 100 JEDDs are operational across Ohio.

In a JEDD, municipalities benefit from the economic activity in the township without the need to annex the land. Essentially, these partnerships allow municipalities to collect income taxes generated from businesses operating within the JEDD, while the township retains its jurisdiction. Additionally, townships gain from property taxes and partial income taxes from these businesses.

By creating a tax base within these districts, JEDDs provide municipalities with increased revenue while helping townships develop key areas for growth. This symbiotic relationship enables both parties to profit from the commercial and industrial revenue generated without complex land annexation processes.

JEDZs (Joint Economic Development Zones)

A JEDZ operates similarly to a JEDD but focuses on specific zones rather than broader districts. These zones are partnerships between local governments and townships designed to tackle specific economic challenges within a defined area.

One notable example is Springfield Township’s JEDZ, established after the Ohio State Legislature cut significant state funding in 2011, which severely impacted the township’s financial stability. The elimination of taxes, such as the estate tax and public utility tax, left Springfield Township in dire financial straits. To offset these losses, the township created a JEDZ to impose taxes on the payroll and net profits of businesses operating within the zone.

The tax applies not only to businesses but also to employees working in the zone. However, residents who do not work in the zone are exempt from these taxes. Revenue generated through the JEDZ helps the township continue providing essential services and fund new initiatives aimed at improving local infrastructure and services.

Key Differences Between JEDDs and JEDZs

While both JEDDs and JEDZs involve partnerships between municipalities and townships, their primary difference lies in their scope and focus:

• JEDDs: Focus on broader districts and are generally aimed at large-scale commercial and industrial development in township areas, often without requiring annexation by municipalities.
• JEDZs: More localized, JEDZs are focused on specific zones within a township, typically to address financial challenges and fund critical services through targeted taxes.

Both JEDDs and JEDZs rely on a board of directors, which collaborates with a tax commissioner to define boundaries, map out district or zone areas, and manage the collection and enforcement of taxes. These arrangements also ensure that both the municipality and township share in the tax revenues generated within the designated areas.

Location Codes

Location codes are essential for accurately calculating taxes based on an employee’s home and work addresses. These codes, derived from the Geographic Names Information System (GNIS), help ensure compliance with tax regulations.

City Location Code

This code identifies the municipality where the employee lives or works, helping determine the applicable local income tax rates.

County Location Code

Similar to the city code, this code pertains to the county of residence or employment, ensuring correct tax rates are applied.

School District Location Code

This code identifies the school district for tax purposes, as some areas impose school district taxes.

Municipality Location Code

Identifies the specific municipality imposing taxes, ensuring the correct local tax is deducted.

Location codes remain tied to specific geographic areas, ensuring accurate and consistent tax calculations. They help streamline payroll processes and reduce errors.