17 Nov Payroll Taxes Not Calculating Correctly
Ask the Expert – Payroll Taxes Not Calculating Correctly
Q – In paying my employees, the Social Security and Medicare withholding are calculating at different percentages for several of the employees. In everything that I can find, it is set up correctly, at 6.2% for SS and 1.45% for Medicare, but it is actually withholding 6.5% for SS and 1.5% for Medicare on these employees.
A – Without the file to look at, all I can do is offer the most common reason for the problem.
The two taxes you referred to are from the tax table. These taxes have not changed this year, so, even if you did not update the tax tables recently, the payroll tax amounts should be calculating correctly. One way to double check is to confirm that the employer calculations are correct. I.e. that only the employee amounts appear to be wrong.
When paychecks are created, the year to date amounts are displayed and subsequently become memo information only. This means that if you changed a prior paycheck and then looked at a future paycheck that was created prior to the change; the year to date amounts would not change. However, as each paycheck is created, the software is confirming that the taxes that are based on percentages (such as FICA and Medicare) are correct year to date. If there is an error, the current pay check is adjusted to make the year to date amounts correct. What this means is that, my guess is, a paycheck earlier in the year was changed for the FICA and Medicare amounts so the software is trying to correct the year to date amounts with each paycheck. As you override the calculation to enter the amount you believe the FICA and Medicare should be for the current paycheck, the year to date amount is never corrected. My suggestion is to let the computer calculations go for the next paycheck and see if the problem persists.