Thursday, January 12, 2012

US Payroll Tax Update - Round 2

The US Payroll Round 2 Tax Update has been released.

**If the above changes do not effect you, you do not need to install the update.

CLICK HERE to read more about the Tax Update Changes

Please contact Renny Staab at 949-457-0500 x206 or to schedule the installation of US Payroll Round 2 Tax Update. **Reminder: US Payroll Round 1 Tax Update must be installed prior to installing Round 2

Payroll Tax Cut Temporarily Extendeed into 2012
Below are answers to a few questions regarding how this effects Dynamics GP
  • With this tax cut/extension, should we use the 2011 federal tax tables or 2012? You should be using the 2012 federal tax tables that are released in publication 1035, see link:
    The Microsoft Dynamics GP 2012 Round 1 Tax Update has the correct rates installed.
  • Did Microsoft implement the "Recapture" provision in the round 1 tax tables for 2012? No, they did not. If you review the guidelines, the article indicates that the additional 2% will be paid in 2013 when the employee files their 2012 tax return. If that's the case then it looks like you should be OK with leaving the FICA at 4.2% even if they exceed the $18,350 threshold for these type of employees. At this point Microsoft is not changing anything around the recapture amount unless more guidelines are released.,,id=251650,00.html
  • Employee, 4.2 or 6.2? On Tuesday, December 27, 2011, Microsoft Dynamics GP re-released the round 1 tax update for 2012 due to congress passing the 2 month payroll tax extension changing the employee FICA rate from 6.2 (previously released) to 4.2.
    To tell you have the correct rate, the new date under Tools Setup System Payroll Tax is 12/29/2011.
    If it is 12/23/2011 that is the old rate (6.2)

    You can also tell by pulling up the FICAS code from this window, choose Filing Status, choose NA, click Tables, you will see the rate and wage limit for 2012.

    The Social Security wage base limit has been increased to $110,100 for employer and employee.

    Note: If the date value in the Payroll Tax Setup window is 12/23/2011, you must reinstall this update in order for the FICA employee tax rate to be updated to 4.2%

    If you paid an employee in 2012 and withheld at the 6.2 rate, you will need to pay them back this money by March 31, 2012. You can do this in Microsoft Dynamics GP as a business expense paycode to pay the employee back the money and then adjust your taxes through the manual check window.

If you have any questions or need help, please contact