2011 FICA Change

Problem

FICA rates changed for 2011-- the employee deduction is reduced from 6.2% to 4.2% during 2011. Some payroll was paid at the incorrect rate.

Diagnosis

We didn't catch this change until late January, so downloaded payroll blanks had incorrect information.

Solution

First, correct the tax item so future payroll calculates correctly. To do so, follow these steps:

1. Choose Payroll Setup from the Costs menu, and choose Tax Items from the submenu.
2. Open the FICA SS Whhold item.
3. Change the rate from 6.2% to 4.2%.
4. Click OK.

Next, you may need to adjust the deduction, to correct for over-withholding in the first pay periods in 2011. To do so, follow these steps:

1. Total the wage amounts for each employee, for any pay days in 2011 at the incorrect rate.
2. Calculate the amount overwithheld for each employee (it will be 2% of the wage total).
3. Choose Preferences from the Options menu, and choose Expenses from the submenu.
4. Turn on the Allow Payroll Deduction Changes checkbox, then click OK.
5. When you use the Write Payroll command during the next pay period, double-click on the Deduct cell for each employee.
6. In the FICA SS Whhold line, subtract the overwithholding calculated in step 2.
7. Complete the payroll process.

Comments

Entered 1/26/2011 by Dennis.