Here is some further information regarding Payroll Year End updates.
- Payroll tax update will include the reduced Fica employee rate
- Mid-January – Microsoft will release a code update to store both the employee and employer rates
- Until then, you will need to make manual adjustments to the employer tax journal entries and payments.
Here is an update on Microsoft stance with the changes for 2011 Round 1 tax update, hope to release yet tomorrow.
We will have all the changes we have noted prior (see bottom below), plus the Federal tax table change and the FICA rate change (employee).
(HIRE Act has NOT been extended for the 2011 reporting year, YEAH). So we all understand as of January 1, 2011 all employees should have a FICA SS withheld of 4.2 percent (used to be 6.2). (If you pay an employee at 6.2 you have to reimburse them the money) The employer still has to pay the 6.2 percent.
Since we only store one rate at this time for employee and employer, areas it will be wrong: Once you install the 2011 update, during the payroll process the employer FICA will calculate at 4.2 percent, customers will need to adjust GL to get the full 6.2 percent as well when they pay in money for the payroll.
All over in our code, we would always “double” the employee amount to get employer so that too will be incorrect.
****In my testing, I also found if you create the year end wage file on 2011 tax tables (which some customers do) with a FICA rate of 4.2, the validation report will kick out errors such as below, so it is very important for our customers to create the year end wage file on 2010 tax tables and not 2011, or they will see issues as I have, we keep “prior year” tax tables on our tax download pages for you.
Around January 24, we will release round 2 tax update (which has several state changes, Arizona, Colorado, North Dakota, Oklahoma, Oregon, Vermont) and a code update that will correct the Employer FICA on reports and inquiry windows, until then payrolls posted need to be adjusted for employer liability in general ledger.
The round 2 code update will be released for the following versions:
9.0, 9.0 SBF , 10.0 and GP 2010
For 9.0 and 9.0 SBF, this will be released after the end of the support lifecycle, but we have been granted permission for US payroll and Canadian payroll customers to finish receiving the year end Round 2 update for 9.0 and 9.0 SBF. The 9.0 support lifecycle date of January 11, 2011 has not changed and we will only provide technical support on installation of this Round 2 Year end tax update. These customers will need to select 10.0 or 2010 as their version when they create those incidents. We highly recommend these customers to upgrade as soon as possible with the changes we are seeing this reporting year.
Note from doc for tax update that is releasing
Round 1: The FICA/Social Security withholding table has changed to 4.2% for employee FICA withholding.
The FICA/Social Security withholding table will be updated for employers in a release scheduled for January, 2011. General Ledger posting, inquiries and reports that show FICA amounts for employers will be calculated using 4.2% until that time. We understand the challenges you face with this; however, it was important to release with accurate employee paychecks starting January 1, 2011. For further details about the upcoming changes, refer to CustomerSource (https://mbs.microsoft.com/customersource/support/downloads/taxupdates/).
Prior State changes for Round 1
- Earned Income credit phased out
- New York City
- Rhode Island
- Puerto Rico