Which statement accurately describes how you create a tax reporting unit (TRU)?

• A. When you identify a legal entity as a legal employer, the application transfers the legal reporting units that are associated with that legal employer to HCM as tax reporting units.
• B. When you identify a legal entity as a payroll statutory unit, the application transfers the legal reporting units that are associated with that legal entity to HCM as tax reporting units.
• C. You can identify a legal entity as a tax reporting unit.
• D. If you identify a legal entity as a payroll statutory unit, you will have the option to identify the payroll statutory unit as a tax reporting unit.

Answer: (B)

The concept being tested is how tax reporting units are created and linked to statutory setup in Oracle Payroll Cloud. When you designate a legal entity as a payroll statutory unit, the system automatically transfers the legal reporting units associated with that entity into HCM as tax reporting units. This creates the TRU structure used for tax reporting and filings, ensuring the tax reporting boundaries align with the statutory payroll setup.

This is why the statement describing the automatic transfer from the legal entity’s legal reporting units to tax reporting units upon marking the entity as a payroll statutory unit is the correct one. Other options don’t reflect how TRUs are created—TRUs aren’t directly created by labeling a legal entity as a legal employer, and you don’t manually identify a legal entity as a TRU or convert a PSU into a TRU through an optional step.