Mike Lupro feels that this isn’t getting enough attention and asked me to pass along more information to make sure that you are up to speed. From Mike:
The delayed passage of the 2011 tax relief bill in congress left zero time for software companies to develop the code needed to elegantly handle the change in employee vs. employer FICA and Medicare taxes. The EOY Microsoft Dynamics GP payroll tax update lowers the FICA/Medicare totals for employees to 4.2% as prescribed by congress. However, the employer tax rate is also calculated at 4.2% even though employers still owe 6.2%.
Here is the text of a recent posting on a Microsoft Forum:
Wednesday, December 22, 2010 2:23 AM
At this point, they are still working on how this will be updated in the system; however, the latest information I have received was that the tax tables will be adjusted to the 4.2% and you will need to make adjustments in the GL. You are correct on PIP as well, as the incorrect amount would be brought over,
I have not heard of any plans to create a report for journal entry adjustments, but I will definitely look into this.
· Wednesday, December 29, 2010 2:34 PM
There are no current plans to create an adjustments report for the FICA amounts on the employer side that need to be adjusted. At this time, the GL adjustments will need to be made until the Round 2 tax code update in January where this will be addressed to correct the employer FICA going forward. This round 2 code update will be released for SBF 9.0, GP 9.0, GP 10.0, and GP 2010.
The following is information provided Onza/BestTechsNW payroll clients:
In light of the above information we thought the following math examples will give employers a working structure in how to calculate and expense the correct deposit amount for FICA taxes until Dynamics’ Round 2 tax update is available:
Step 1: Calculate the correct Tax Deposit Amount before remitting to EFTPS:
Fed W/H Tax + Employee FICA/MED Tax + (Employee FICA/MED Tax / 4.2 x 6.2) = Total deposit amount.
PR Report shows FWT of 14,000 and employee FICA/MED Liability of $10,000
But the employer owes more than the $34,000. Here’s how to calculate the total amount due:
Calculated PR EFTPS deposit amount =
+ Employee FICA/Med $10,000.00
+ Employer FICA/Med (10,000 / 3.4 x 6.2) = $14,761.90
= Total deposit = $38,761.90
Step 2: Microsoft Dynamics GP will auto-post the (incorrect) 4.2% employer portion for FICA/Med tax
Payroll Process: Credit PR Tax Liability $34,000
Debit PR Tax Expense - Dept 1 $20,000
Debit PR Tax Expense – Dept 2 $14,000
Note: If you’re using PIP (Payables Interface to Payables) the automated voucher amount for the IRS vendor will be $34,000.
Step 3: Remit the correct tax amount to the IRS via EFTPS or through your bank
The payroll liability account now looks like this:
Credit from Payroll $34,000
Debit from EFTPS 38,761.90
= Debit Balance in Liability after EFTPS payment $4,761.90
Step 4: Calculate and post (a GL Transaction) for the departmental expense from the ‘extra’ tax
|Dept Amt||Total Amt||Percent by Dept||Extra tax amt||Dept Exp Amt|
Credit PR Liability Account $4,761.90
Debit PR Tax Expense - Dept 1 $2,801.12
Debit PR Tax Expense - Dept 2 $1,960.78