However in US there are many taxable earnings, and so cumulations cannot be used. So SAP has provided with the Tax model concept. Using tax model concept , we can group wage types for different type of taxes very effectively.
Tax Types :
Each type of tax has been assigned a 2 digit code, and is called as tax type.
These are maintained in the table T5UTT
Tax Authority and Tax Model
First we assign to each Tax Authority a Tax Model. At this point a tax model can be any 3 character numeric. Table T5UTE
Then for each of the tax model, we have various combinations which are based on, the Infotypes (0207, 0208, and 0209), value of the tax modifier for the employee, and value of the processing class 71 for the wage type.
For a combination of these, we need to assign a Tax Combo, in Table T5UTM
For for each of these tax combos we assign the applicable tax types. Table T5UTY
Looks confusing. Lets take an example.
We have an employee who has a wage type 1000.
The value for PC71 for the wage type is 1.
And for the employee in Infotype 207 and 208 - the value is CA
Now coming to our table, for Tax authority we have assigned the tax model 10.
And in the other table for tax model 10 -of the infotype os 207, and for the value of modifier 01, and
Now CA is assigned to Tax model 10.
And Tax Model 10, and our wage type 1000 , will be assigned tax combo 1,2,3.
So for this wage type taxes (ie the earnings on this wage type) 1, 3, 5, and 16 are deducted.
