W2 report - difference in Medicare numbers

[jasanton]

While filling W2 forms online (SSA site) the form filler advised me that in two case (we have 5 employees) the medicare tax is different that the one shown in W2 forms from ZPAY. I traced that to the rounding - SSA website calculates 1.45% from total of the year's pay. The ZPAY adds individual transactions during the year. But there is a discrepancy. In one case only $.02 in another $.24
What amounts should I be putting in? Why other emplyees have the numbers right?
Thank you,
John

[Paul Mayer]

That sounds like you either did after the fact payroll entry or may have edited payroll figures after calculating the taxes as we use the percentage and it's always to the penny.

[jasanton]

I calculated individual transactions in case of one worker (whe gets paid only once a month, so it was easy) and the total numbers for his Medicare match what is in the W2 from ZPay. But when I calculated his medicare as the SSA does - total annual pay X 1.45% - it was by 2 cent different.
Thanks

[jasanton]

Hello - to convince you about the problem and since transactions were small and only 12 of them
Monthly pay for that particular employee was
$60 - Medicare .87, 145 - 2.10; 90 - 1.31; 115 - 1.67; 60 - .87; 60 - .87; 60 - .87; 90 - 1.31; 90 - 1.31; 90 - 1.31; 90 - 1.31; 90 - 1.31
So individual Medicare tax is calculated correctly for each pay period. Total of these equal $15.11
While total pay for the period is 1,040. Multiply that by 1.45% = 15.08
Thank you -
John

[Paul Mayer]

Can you send us a backup of your database with a detailed explanation of the employee the figure the IRS site gives that is different from what we have on the W2 Form?

Follow the instructions here:

http://zpay.com/vbulletin/showthread.php?1449

I'm wondering if the IRS is using a rounding formula different that we are now?

Since we add up each single transaction, I can see where they may be a rounding difference.

[jasanton]

I'll be glad to!
Thank you -
John

[Paul Mayer]

We received your database and after going through with close scrutiny, we see what it is. PayWindow is calculating and then storing each payroll transactions for your employees then you pay the taxes. To give you the reports, we actually add up all of the transactions. Which will round out for Medicare since Medicate is calculated at three decimal places. 1.45% is actually 0.0145 when using a calculator.

Let's look at your last quarter for the one employee, the Month, Wages, calculated with two decimal places and then in brackets carried out to three decimal places:

Oct - $90 - 1.31 (1.305)
Nov - $90 - 1.31 (1.305)
Dec - $90 - 1.31 (1.305)

So if you take the data we stored and add it up, it comes to 3.93, but if you take the total of 270 and multiply it by 1.45% it comes out to 3.92.

We can only give you the real figures that were calculated per pay period as that is actually what you paid. If you are using the on-line data entry that will take that total "annual" figure and multiply it by the 1.45%, it will be a few pennies different.

You will need to use the figure they give you since their entry will not allow you to enter it if you don't.

In brief... We are giving you the correct figures as they come from individual payroll transactions. But since it is using a tax percentage that is not two decimal places but three 0.0145 there has to be rounding when calculating on an annual base and we report exactly what was deducted and paid.

[jasanton]

Thank you Paul.... That makes it clear now. I'm afraid no way to correct that?
Another issue rising from the same source would be the discrepancy in the NJ taxes - they differ in ZPAY from the posted on the 927 filing form... The taxes for NJ Work force, Unemployment and new Family Leave go even deeper - Unemployment e.g. 0.003825 - .3825%.... But at least I know where the problem lies.
Thank you again for looking into the issue -
John

[Paul Mayer]

When you add up the individual transactions, that's how it works. And it is the same if you actually did payroll by hand with a calculator. You will get the rounding of cents in the end when you do the math on a Quarter or the Yearly wages.

And you MUST report what you actually deducted each pay date. As you know, when carried out several decimal points, there is no way to slice a penny each pay day. So in the end if you are reporting on-line, you will round up or down. The paper forms like the 941 actually have line 7a for that purpose:

CURRENT QUARTER’S ADJUSTMENTS, for example, a fractions of cents adjustment.

[jasanton]

Thanks Paul. It's true but the problem that arose for us is that the NJ state deposit tax form on the internet (that's the only way of paying 927 now) calculates things for you after you enter the total pay and State GIT. And we'd rather stick to what they have... At the end we have to either reimburse the company or the employee for the difference. It's a pity things are not straight forward so we could have these two match but I'm afraid we'll live with that and know what to correct.
Thank you -
John

[Paul Mayer]

Yes, that was never a problem in the past because we used paper reports, also all taxes used to be two decimal places too. But now with the on-line tools that calculate against the annual total all you can do is to use their results when reporting on-line.