For those of you who haven't heard, the Federal Government has passed a law that reduces the amount of the Social Security Taxes withheld on your employees' paychecks from a rate of 6.2% to a rate of 4.2% - in effect providing every American a 2% pay increase. The government has decided that the Employer will NOT receive a rate reduction - and will still continue to pay 6.2%. Unfortunately, this will require the Software Development Team at Microsoft to introduce totally new "code" into the software to accommodate the change. This new code will not be available until mid-January at the earliest. Therefore, we've summarized our recommendations to our clients as to how to process 2011 payrolls until the new code is released (and applied) in your environments:
- The FICA - Social Security Table should be changed to 4.2%
- When you process your payrolls - and the Check Register is produced, the "Total Tax Liability" shown at the bottom of the report will be INCORRECT. This amount should NOT be remitted.
- You should manually calculate the Employer portion due by taking the field labeled "Employer FICA Owed" on the Check Register - and multiplying it by 1.35399. The result will provide the correct Employer taxes due - which will then be added to the Employees' taxes withheld - and this will be the amount that will need to be remitted for your Total Tax Liability. The example below shows what this would look like if you had $10,000 of pay. Please note that this method will NOT work if you have certain special circumstances - or if you have any employees who will be over the $106,800 wage limit this quickly in 2011.
On behalf of Microsoft, we do apologize for this inconvenience - but with the government announcing this change in the later part of December, it was impossible for the coding to be done in a quality oriented fashion to accommodate early January 2011 payrolls. We at Pinnacle are here to assist you if you should have any questions.