Purpose: This guide will provide an overview of the tax adjustment process for payroll administrators.

Table of Contents:

• Overview
• State and local tax changes
• Annual tax updates
• Where to find adjustment information in Payroll

The following are reasons for tax adjustments in BambooHR Payroll: 

1. State and local tax changes: Changes in state or local tax rates or regulations may require adjustments to the amount of state and local taxes due.
   1. Subject wage changes
   2. Unemployment taxes with client-assigned rates
   3. Local and State taxes that have a fixed rate
   4. Excludes taxes regulated by agencies as not allowed to retroactively-collect (i.e., CO PFML EE, WA PFML EE, & WA Cares)
2. Annual tax updates: Changes received annually from federal, state, and local tax laws, including changes to tax rates and wage thresholds.

Each state agency sets an unemployment rate unique to your company. 

When our system updates your unemployment tax in your account, it recalculates the tax liability and may create an "adjustment" based on the information inputted. You will see the adjustment reflected in a future payroll run, either as a credit or a collection, depending on the rate change. 

If a rate change occurs mid-quarter, the adjustment may include a collection of uncollected tax for the previous payrolls in the quarter. Likewise, if the state reduces a rate mid-quarter, you will receive a refund for any over-collected tax from the quarter’s previous payrolls. 

For employee tax-type adjustments, we will complete a one-time collection or refund directly with your bank if an adjustment is needed for a rate change that increases or reduces tax liability for a terminated employee. You are responsible for working with the former employee to refund or collect the adjustment amount.

It is important to keep your unemployment rates and tax frequencies updated in BambooHR to ensure that BambooHR Payroll calculates and pays your accurate tax liability.

Once a quarter is filed and paid, rates cannot be adjusted.

If the federal or state (including UI and local) agencies update tax rates or change the wage thresholds, we will recalculate tax liabilities and process any necessary adjustments accordingly.

Typically, state agencies issue notifications regarding employer rates, frequencies, and thresholds at the start of each calendar year, either electronically or by mail, depending on your account setup. Nevertheless, please be aware that you could receive a notification from the agency at any point in time for retroactive changes. We recommend logging into your state websites quarterly to verify rates and frequencies.

Adjustments on your Payroll Register report may be combined with current period taxes. Below is an example of where you would see an adjustment on the Payroll Register report. The amount will appear either as a debit or credit in the second Current column of the report. Adjustments executed via Payroll do not trigger notifications.

For any one-time collection or refund adjustments processed directly with your bank, you will receive an email alert that includes the adjustment information and will see the amounts on date range reports, (e.g., Payroll Register).