The standard system lets you recalculate tax during a retroactive payroll run. The retroactive payments are taxed in the period in which the payment was originally made.

Retroactive tax calculations in the original payroll period are processed using the standard SAP retroactive accounting function.

Retroactive tax payments are calculated in the period of the original payment as opposed to the current period. This means that if additional pay or less pay is calculated for a retroactive period, the system recalculates the taxable gross for the original period and taxes the new amount in that period. The standard SAP retroactive accounting function is then used to report on the retroactive tax payments or refunds.

An employee receives a salary of $2,000 per month of which $391,10 is deducted in tax. You are currently running payroll for period 02 and the employee receives a pay increase of $100 backdated to period 01.

Period 01 is recalculated and tax is applied to the new salary amount of $2,100 to give $426,40 in tax. The system calculates the net difference between period 01 in 01 and 01 in 02. The net in period 01in 01 is $1608,90 ($2000,00 - $391,00), and in period 01 in 02 is $1673,60 ($2100,00 - $426,40). The net difference of $64,70 is then assigned to wage type /552, carried forward to period 02 and added to the net in period 02.