Troubleshooting payroll check tax calculations

If taxes are not calculating correctly on payroll checks, here are some steps to take to identify, understand, and correct the problem.

Internal use only

Behind the scenes

Accounting CS uses a third party software called Symmetry Tax Engine for the calculation of withholding and deduction items.

If you need or want to compare Accounting CS calculations to something external, you can use Paycheck City powered by Symmetry
to figure the calculations online.

For addresses, Accounting CS Development generally goes by what MelissaData says. Note that P.O. Box addresses do not verify all the way down to street level, so in places like Ohio or Pennsylvania you may have to have the user use a different address nearby to calculate the taxes.

Inconsistent tax calculations

If the tax calculations have inconsistent limits or rates even after updating to the most recent version of Accounting CS, verify they are opening the application with a right-click, run as Administrator. The users need to have full rights to their WinCSI and C:\Program Files (x86)\Creative Solutions\Accounting CS directories in order for the application to correctly calculate taxes.

If inconsistencies persist, make sure all staff members that use the Accounting CS have the proper user permissions configured.

In a nutshell, the main folders they need full rights for correct tax calculations are the WinCSI and C:\Program Files (or Program Files (x86))\Creative Solutions\Accounting CS and all of its subfolders, particularly the STE subfolder.

How does this happen in a network environment? When users don’t have proper permissions to the folders/files, Microsoft Windows will store a copy of the tax update files locally in the Virtual Store folder. Unfortunately, Accounting CS will use the Virtual Store folders instead of the correct location. This will create issues because Virtual Store folders don’t get updated when Accounting CS is updated though connect.

If users are experiencing inconsistent tax calculations across their user logins after a rate change, perform the following steps for each user reporting this issue.

Close Accounting CS.

Go to C:\Users\UserID\AppData\Local\VirtualStore\Program Files (x86)\Creative Solutions\Accounting CS.

Delete the STE folder.

Open Accounting CS and have the user enter another test payroll check to verify the tax calculations are working properly.

note

If the user doesn’t want to delete the STE folder, have them copy and paste the folder to their desktop. They can delete later.

Verify exemption selections

Setup > Clients > Payroll Taxes tab:
In the Taxes section, are any of the checkboxes in the Wage Exempt column marked?

Setup > Payroll Items:
Are any items excluded from gross or net pay? Are any jurisdictions marked on the Tax Exemptions tab that should not be?

Setup > Employees > Payroll Taxes tab:
Is the Federal tax exempt checkbox marked? Is the Tax exempt checkbox under the State Withholding section marked? Are any of the checkboxes in the Wage Exempt column marked in the Taxes section?

FIT (Federal Income Tax)

FIT is withheld according to IRS Publication 15
.

This is a combination of the information received on the Form W-4 and the frequency of the payroll checks.

Make sure the frequency on the payroll check is correct:

Enter Transactions screen

The Frequency
field is located within the Handwritten/Check #
section.

Enter Batch Payroll Checks screen

The Frequency
is located near the Payroll schedule field.

Setup > Clients > Payroll Information tab

Select the ellipsis near Payroll Schedules

The Pay Frequency
is within the Pay Schedule Information
section.

FICA-SS and FICA-MED

Accounting CS keeps track of how much has been withheld for FICA-SS and FICA-MED so that at the end of the year the correct amount is withheld. Incorrect withholdings are usually the result of the FICA amounts being overridden on previous payroll checks. If the withholding seems to be incorrect, use the following procedures to verify the withholding amounts are actually incorrect and find the checks where overrides were made.

Internal use only

The FICA-SS and FICA-MED withholding are handled a little differently in the background. Accounting CS actually keeps track of the amount withheld YTD when calculating how much to withhold on the current check. This is often referred to as "playing catch-up" and usually happens when the person entering the payroll checks overrode the FICA amounts.

Employer FICA-Med doesn’t catch-up. Instead, it calculates based on the amount in Employee FICA-Med. The user may need to adjust the catch-up amount manually. This is documented in ADO 196450
. If a firm request Employer FICA-Med to pay catch-up, add their Firm ID to ADO 797700
.

Rates: FICA-SS = 6.2% and FICA-MED = 1.45%

For after-the-fact payroll (or an employee who started after the 1st payroll of the year), checks need to be entered in date order for the amounts to calculate correctly.

Use reports to show the amounts are actually not correct YTD

Use the following reports/steps to verify that because overrides were made, the withholding amounts YTD are not correct and therefore Accounting CS is not calculating the exact percentage expected.

Run a Payroll Tax Summary - Detailed report.

note

For the employee portion, it will be half of the rate displayed.

OR, run a Payroll Journal with Taxable Wages.

Take the YTD taxable wage amount and calculate what the withholding should be.

note

Internal use only

At this point the user will say Accounting CS withheld too much or too little, and you can go looking for where the overrides were made on the check.

note

A FICA-MED2 tax might show here. This calculates once an employee has $200,000 in YTD FICA taxable wages. The FICA-MED2 tax rate is 9%.

How to check for FICA overrides on payroll checks

In Enter Transactions
, to to Bank Account Mode
.

In the Filter
, filter for a particular employee by ID or name.

Sort the list of transactions by date, and then locate the 1st payroll check for the year.

Select each payroll check and look for amounts in red for FICA-SS
and FICA-MED
.

If you do see overrides on the FICA taxes, Accounting CS is changing the amount withheld so that at the end of the year, the correct amount is withheld for the employee. Note: the employer FICA-MED amounts will need to be adjusted as they’ll populate based on calculated Employee FICA-MED amounts.

Internal use only

If you do see overrides on the FICA taxes, Accounting CS is indeed "playing catch-up" so that at the end of the year, the correct amount is withheld for the employee. The user's options at this point are to delete and re-enter the checks without making overrides, let Accounting CS make up for the past overrides, or continue to override the FICA amounts for the remainder of the year.

There are 3 options:

Delete and re-enter the checks without making overrides.

Let Accounting CS make up for the past overrides, adjusting employer FICA-Med amounts as needed.

note

Accounting CS won’t make up or correct employer amounts in future checks.

Continue to override the FICA amounts for the remainder of the year.

note

On the Enter Transactions screen
, select Edit > Options
and select the Display taxes with zero wages and amounts
checkbox to easily make adjustments to the FICA taxes without entering wages. Note that you may need to adjust taxable wages as well.

If the FICA wage limits are not being honored, or are using old limits, verify that Accounting CS is being run as an Administrator.

Close the Accounting CS application.

Right-click on the Accounting CS icon on your desktop and select Properties
.

On the Compatibility tab, select the Run this program as an administrator
checkbox.

Select Apply
and OK
.

Open Accounting CS and verify that the FICA taxes are calculating properly.

For after the fact payroll, or clients or employees who started after the 1st payroll of the year, previous payroll information needs to be entered in the correct date order for the FICA amounts to calculate correctly.

FUTA

Sometimes the FUTA amount is double what it should be.

Select Setup > Employees and select the Payroll Taxes tab.

Unmark the Full FUTA rate
checkbox.

Multi-state calculations

Employees who work in multiple states will have different withholdings depending on which states are involved. Accounting CS works in the background with your setup selections to determine which state withholdings should calculate. Before you continue with these steps, be sure that you know which taxes for which state(s) should be calculating.

Internal use only

First, get key information from the user.

Which state does the employee work in?

Which state does the employee live in?

Does the non-resident state have nexus
with the resident state?

tip

If a client has nexus in a jurisdiction, it means that they have a business connection or a presence in that jurisdiction and are therefore subject to a state or local income and sales taxes.

Does the employee have a certificate of residency on file?

Then, use the algorithm to figure out what should be calculating.

With the information you've gathered, use the algorithm to determine if everything is set up correctly in Accounting CS.

Determine if there is a reciprocal agreement between the 2 states using the algorithm table.

Follow the path in the algorithm diagram based on the information gathered from the user and the information contained in the algorithm table.

As you follow the diagram, note that the colored diamonds in the diagram correspond with the colored column-headers in the table. This should help to you to answer the questions more easily as you follow the diagram to the appropriate withholding setup.

note

Be careful with the algorithm table. The 1st 2 columns Has state tax
and Withholds for nonresidents
are based on the NONRES state - so you should find the row for the NONRES state to determine the answer. The last 3 columns are based on the RES state, so you should find the row for the RES state to determine the answer.

Examples

States with reciprocal agreement
: The client's work location is Chicago, IL. The employee lives in Kalamazoo, MI, and works at the Chicago location.

For each NONRES state (IL), does a reciprocal agreement exist (with MI)? YES.

Does the NONRES state (IL) have Nexus with the RES state (MI)? YES/NO.

Is there a certificate of residency on file (and the checkbox marked in Accounting CS on Setup > Employees)? This answer (and checkbox!) determines what calculates.

States without a reciprocal agreement
: The client's work location is Oregon, but the employee lives in Idaho.

For each NONRES state (OR), does a reciprocal agreement exist (with ID)? Look at the last column on the table, answer is NO.

Does the NONRES state (OR) have Nexus with the RES state (ID)? For our example, YES.

Does the RES state (ID) withhold on residents working out of state? Look at the 3rd column on the table, find ID, answer is NO.

Does the RES state (ID) withhold when the NONRES state (OR) has no required withholding? Look at the fourth column on the table, find ID, answer is NO.

Accounting CS should calculate withholding on the NONRES state (OR).

Setup items in Accounting CS that may be affecting multi-state calculations

Residency certificate on file checkbox

Select Setup > Employees > Payroll Taxes
tab.

In the State Withholding
section, select the nonresident state
.

Select or unmark the Nonresident exemption certificate
checkbox.

Nexus checkbox

Select Setup > Clients > Payroll Taxes
tab.

In the State section
, select the state from the dropdown.

Select or unmark the Client has nexus in this state
checkbox.

Alternatively, if a local tax is not calculating select the Local button and select or unmark the checkbox for the locality in the Nexus column.

Resident and/or Taxing addresses

Because Accounting CS uses the addresses entered to determine what taxes calculate, it is important to review how the addresses are set up.

Select Setup > Clients > Main tab.

Verify that the correct address is marked as the Taxing address
.

Select the
bars button
near the address to look up and validate the address.

If the client has more than 1 location, select the Locations
button and make sure that the correct address is marked as the Taxing address
for each location.

Select Setup > Employees > Main tab

Make sure that the correct address is marked as the Resident address
.

Select the bars button
to the right of the first line of the address to look up and validate the address.

Employee locations

Select Setup > Employees > Main tab.

In the Locations and Departments section, make sure that the employee is assigned to the correct locations.

note

When entering payroll checks, all hours/amounts will be allocated to the location marked as the Primary
location. If hours/amounts need to be allocated to more than one or a non-primary location, use the ellipsis button to properly enter hours worked.

Pay item tax exemptions

This happens sometimes with clients converted from CSA who have different pay items set up for different states or localities. You will need to make the pay items not exempt from the other jurisdiction's tax and enter the hours using the ellipsis button for the correct location.

Select Setup > Payroll Items.

Find the pay item and edit it.

On the Tax Exemptions tab, look for anything that is marked.

Wage exemptions

Employees can be wage exempt in certain circumstances according to IRS Publication 15. The Wage Exempt checkbox should be marked ONLY if the employee meets the requirements for the circumstances described by the IRS.

There are 2 places where the Wage Exempt checkbox can be marked: on the Payroll Taxes tab on Setup > Clients and Setup > Employees. Note that marking the Wage Exempt checkbox on Setup > Clients makes ALL employees' wage exempt.

important

This checkbox should NOT be marked to force taxes to calculate for another jurisdiction.

Marking the Wage Exempt checkbox in the Taxes section indicates that the employee is not subject to that tax at all. Wages for that employee won’t be reported on payroll tax forms, or included on any reports generated from Accounting CS.

Tax Exempt checkboxes

Marking the Federal tax exempt
or Tax exempt
checkboxes in the Federal and State Withholding
sections on Setup > Employees > Payroll Taxes
tab means that the employee's wages are still reported on the payroll tax forms, but no amounts are withheld from the payroll checks. These wages will also appear on reports generated from Accounting CS.

If you are unsure whether or not an employee qualifies to be tax exempt, refer to IRS tax topic 753
.

Local withholdings

If you are not seeing local taxes calculate like you expected, first refer to the particular state's website.

Use Ohio's The Finder website
to determine what should be withheld according to the state.

Use Pennsylvania's website
to determine what should be calculating according to the state.

Setup items in Accounting CS that may be affecting local tax calculations

Verify addresses

One of the best troubleshooting steps you can take when troubleshooting a local tax not calculating (OH and PA especially) is to make sure that the addresses entered in Accounting CS are good, and that they’ve been properly verified

Select Setup > Clients > Main tab and verify the existing client (work location) address by selecting the bars button to the right of the 1st line of the address.

Select Setup > Employees > Main tab and verify the existing employee (resident location) address by selecting the bars button to the right of the 1st line of the address.

Select Actions > Enter Transactions and start entering a payroll check for the employee. If you enter a check for $100.00, you can easily see the rates everything is calculating at.

Nexus checkbox

If a client has nexus in a jurisdiction, it means that they have a business connection or a presence in that jurisdiction and are therefore subject to state or local income and sales taxes. You can use this checkbox to turn on courtesy withholdings for local jurisdictions.

Select Setup > Clients > Payroll Taxes tab.

In the State section, select the state from the dropdown menu.

Select Local and select or unmark the checkbox for the locality in the Nexus column.

Employee locations

Select Setup > Employees > Main tab.

In the Locations and Departments section, verify that the employee is assigned to the correct locations.

note

Pay item tax exemptions

This happens sometimes with clients converted from CSA that have different pay items set up for different states or localities. You will need to make the pay items not exempt from the other jurisdiction's tax and enter the hours using the ellipsis button for the correct location.

Select Setup > Payroll Items
.

Find the pay item and edit it.

On the Tax Exemptions
tab, look for anything that is marked.

Internal use only

If you are still not seeing the correct taxes withheld after all of this, you will want to use the addresses in a couple of other places to see what they say. Accounting CS generally goes by what MelissaData has in their database, so you can enter in one or both addresses to see where they are.

If you are still not seeing the correct taxes withheld after all of this, you may also want to check the address at the United States Postal Service website to see if the address given to you by your client agrees with their database.

Exemption allowances:
The application uses the number of state allowances to figure the local as well. There is not a way to indicate that the local exemption allowances are different from the state allowances. You will need to manually calculate and override one of the withholding amounts in these situations, or you can vote on Idea #2355 on the Accounting CS Ideas Community.

The Accounting CS Ideas Community is the best way to report incorrect address verifications for local taxes to our development team. The scope, feasibility, and popularity of a suggestion will impact whether it will be implemented in a future release of Accounting CS.

Limits being ignored (FUTA or SUTA)

This usually happens with after-the-fact payroll clients when the payroll checks are not entered in the correct sequence.

important

When a payroll check template is used for an employee, the application deducts payroll taxes at the limit that is specified in the template, even if the employee reaches the threshold limit for the tax. The payroll processor needs to manually update the employee's payroll check template when they’ve reached the limit.

If you enter a check for June before you enter a check for April where the employee hit the limit, Accounting CS doesn’t know that the limit was reached and will calculate the withholding on the June check.

The Payroll tax summary - detailed report is helpful in this situation.

Unfortunately, the only resolution is to delete the checks that have FUTA or SUTA amounts on them. Additionally, delete any checks that have incorrect FUTA/SUTA amounts. You'll need to re-enter the corrected checks in sequential order. When you re-enter the checks, you don’t need to enter each one individually unless you, or your client are looking for that level of detail on the reports. Otherwise, if you don’t need so much detail, you can enter monthly, quarterly, or year to date checks for the employee.

Multiple checks with the same payroll check date

Prior year-to-date taxable wages on payroll checks are calculated based on both unprinted and printed checks with the same or an earlier check date. When multiple checks are entered with the same date, the calculation is based on the order the checks were entered. Suspended batches of checks don't impact calculations.

For example, if an unprinted payroll check is entered and reaches a tax limit, then a 2nd check is entered for the same employee using the same check date. The calculations included in the previously entered unprinted check will be factored in when calculating the prior year-to-date amounts.

This article applies to:

Product: Accounting CS
Subject: Payroll checks

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Troubleshooting payroll check tax calculations

Behind the scenes

Inconsistent tax calculations

Verify exemption selections

FIT (Federal Income Tax)

FICA-SS and FICA-MED

FUTA

Multi-state calculations

Setup items in Accounting CS that may be affecting multi-state calculations

Local withholdings

Setup items in Accounting CS that may be affecting local tax calculations

Limits being ignored (FUTA or SUTA)

Multiple checks with the same payroll check date

This article applies to:

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