Paul Mayer
04-06-2011, 04:22 PM
Employee FICA and Medicare figures can and will appear from time to time on the reports. This is normal and the IRS even expects it as that is why line 7 on the 941 form is the "Current quarter's adjustment for fractions of cents".
From the IRS instructions:
"7. Current quarter's adjustment for fractions of cents. Enter adjustments for fractions of cents (due to rounding) relating to the employee share of social security and Medicare taxes withheld. The employee share of amounts shown in column 2 of lines 5a, 5b, and 5c may differ slightly from amounts actually withheld from employees's paychecks due to the rounding of social security and Medicare taxes based on statutory rates."
You see, each individual payroll transaction stores the employees data for a given pay date. You MUST report what is deducted from the employee's pay.
Following is a simple example of a test you can perform with your calculator to see how the rounding occurs:
Let's say that you have ten employees that earn $1,111.11 each on a payroll date and the FICA rate is 4.2%.
$1,111.11 * 4.2% = $46.67
Add up 10 times the $46.67 which is $466.70 which is what you collected and MUST pay with your share of the FICA.
Now take that total taxable payroll amount which is 10 * $1,111.11 and the result is $11.111.10. Multiply that by 4.2% and the result is $466.67.
Did you notice that there is a 3 cents difference? That's right and that will show up on line 7 of the 941 Form as the IRS expects it to.
From the IRS instructions:
"7. Current quarter's adjustment for fractions of cents. Enter adjustments for fractions of cents (due to rounding) relating to the employee share of social security and Medicare taxes withheld. The employee share of amounts shown in column 2 of lines 5a, 5b, and 5c may differ slightly from amounts actually withheld from employees's paychecks due to the rounding of social security and Medicare taxes based on statutory rates."
You see, each individual payroll transaction stores the employees data for a given pay date. You MUST report what is deducted from the employee's pay.
Following is a simple example of a test you can perform with your calculator to see how the rounding occurs:
Let's say that you have ten employees that earn $1,111.11 each on a payroll date and the FICA rate is 4.2%.
$1,111.11 * 4.2% = $46.67
Add up 10 times the $46.67 which is $466.70 which is what you collected and MUST pay with your share of the FICA.
Now take that total taxable payroll amount which is 10 * $1,111.11 and the result is $11.111.10. Multiply that by 4.2% and the result is $466.67.
Did you notice that there is a 3 cents difference? That's right and that will show up on line 7 of the 941 Form as the IRS expects it to.