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Adjusting entries for 2011 payroll paid with Employee FICA share still set at 6.2%

Fri, 01/21/2011 - 15:42 — Sue Clay

If you did not upgrade to CDM+ 9.0 AND update Tax Tables for 2011 before writing payroll in 2011, you will need to make an adjustment for FICA withholding in a subsequent payroll.

 
  1. Run a Taxable Income Detail report in a composite format for the payroll records that did not receive the 2011 tax holiday reduction in Employee FICA share to 4.2%.
  2. Calculate 2% of all FICA taxable wages paid in 2011 prior to updating Tax Tables for 2011 for each employee. If you have a spreadsheet program you can use the clipboard option in CDM+ to copy and paste the report into that program for easy calculations.
  3. Before you run your next payroll go to the Employee Information window and click on the Pay Items tab. In the Taxes section under Add On Amounts, enter the amount they should receive in the box next to FICA as a negative number. (Since the Add On Amounts are amounts to be withheld (subtracted), a negative number will result in adding that amount to the employees paycheck.)
  4. After this payroll has been calculated and checks printed go back to the Employee Information window and zero out the adjustment for each employee
 
For example:
 
As shown in the Taxable Income Detail report below, Ruth Stokes' FICA withholding was $49.60. 
 
Taxable Income Detail report
 
With the 2011 tax holiday reducing the employee share of FICA by 2% to 4.2%, it should have been $33.60 (.062 x 800.00 = 49.60 and .042 x 800.00 = 33.60). The difference between these two amounts (49.60 - 33.60 = 16.00) or 2% of the FICA taxable wages (.02 x 800 = 16.00) is the amount overpaid that needs to be adjusted.
 
On the Pay Items tab of her Employee information window, enter -16.00 in the FICA box underneath “Add On Amounts” before calculating the next payroll. It is entered as a negative number because these fields are for amounts to be withheld and you are adding this amount to the paycheck.
 
Employee Information - Pay Items with adjusting FICA entry/sites/kb.cdmplus.com/files/image/Payroll/Employee%20Info%20FICA%20adjustment.png
 
After calculating payroll and printing paychecks with the adjusting amounts included, return to the Employee Information window and change the FICA Add On Amounts to 0.00.
Keywords: 
2011 tax holiday, adjusting FICA withholding, 4.2% Employee FICA, adjusting entry