The Semi-Smoothing Formula is one of the tax calculation methods that is used to calculate taxes (P.A.Y.E.) in the POWERpay Payroll.

The semi-smoothing tax formula takes into account the YTD taxable gross pay and YTD tax deducted. It does not consider what part of the current cycle pay is regular or irregular. It is currently available for Trinidad and Tobago only.

This is how it works:

1. Finds ALL taxable pay in the current cycle. This includes irregular and regular pay, as well as non-cash allowances.
2. Multiplies the figure found in step 1 by the number of remaining cycles in the year
3. Calculates tHe annual taxable earnings by summing the YTD taxable earnings and values found in steps 1 and 2.
4. Calculates tax on the yearly estimate found in step 3.
5. Deducts the YTD tax paid so far from value found in step 4.
6. Divides the value found in step 5 by the number of remaining cycles in the year plus 1 (to include the current cycle).

Special Case – Vacation Pay

The only special case is for employees receiving vacation pay in advance. The user must enter a V NOC cycle change line, indicating the amount of vacation cycles the employee is proceeding on. The system will then:

1. Find ALL taxable pay in the current cycle. This includes irregular and regular pay, as well as non-cash allowances.
2. Divide the figure found in step 1 by the number of vacation cycles entered plus 1.
3. Multiply the figure found in step 2 by the number of remaining cycles in the year plus 1 (to include the current cycle)
4. Add the YTD taxable earnings to projection found in step 3.
5. Calculate tax on the yearly estimate found in step 4.
6. Deduct the YTD tax paid so far from value found in step 5.
7. Divide the yearly tax found in step 6 by the number of remaining cycles in the year plus 1 (to include the current cycle).
8. Multiply the single-cycle tax found in step 7 by the number of vacation cycles entered plus 1.