Medicare rounding

[jasanton]

Hello,
I noticed Medicare rounding that is off a few cents with some of the employees. No exemptions.
Eg total pay 1,201 medicare tax is calculated as 17.41 instead of 17.42.
Could that be corrected?
Thank you,
John

[Paul Mayer]

That is because when you pay the employees, there FICA tax is calculated for each payroll transaction and deducted from their wages and stored.

When you have wages with dollars and cents, and multiply it by the FICA rate like as an example 523.36 * .042 = 21.9811 which is rounded down to 21.98. Since you pay what you've deducted (above), you really cannot take the total wages of all employee transactions and not get rounding up or down a penny or so compared to adding up all of the individual transactions.

That's where the 941 form comes into action as it does the math on the totals and you settle up with the cents out of round.

[jasanton]

Thanks Paul,
still there is an issue - when paying to the IRS they take total transactions and calculate the amounts owed by Medicare 1.45% and FICA 4.2% per employee.
In the example I gave rounding up was not done correctly:
" total pay 1,201 medicare tax is calculated as 17.41 instead of 17.42".
The exact number is 17.4145 so it should be rounded to 17.41, since the next digit is less than 5. That might keep it at the end closer to the IRS numbers too.
I understand the problem of individual rounding and then total taken by the IRS general but question the above example's rounding.

Thank you -
John

[Paul Mayer]

That's why I pointed out the 941 Form as it is when you settle up for differences. You actually pay what you collected from the employee wages and your share when you as an example pay on-line at www.eftps.gov (http://www.eftps.gov) using the amount shown on the Employer Totals Report.

We can only give you the total of what you deducted from each employee's wages and that is what we are doing. If you feel comfortable about adjusting that amount, it's up to you when you pay.

[jasanton]

Thanks Paul,
the only question remains for me - what is the method of rounding? If the number to the right is less than 5 it shouldn't affect the number on the left. If 5 or more - then I increase the previous number by 1.
It's just not clear for me what method is used.
Thank you -
John

[Paul Mayer]

That's correct. Examples:

0.006 --> 0.01
0.005 --> 0.01
0.005 --> 0.00

[jasanton]

So would the $17.4145 not be 17.41 instead of $17.42 calculated by PayWindow?

Thanks,
John

[Paul Mayer]

No we add up each individual payroll transaction which is rounded when it is calculated. There is no rounding when adding the figures for the month, quarter or year.

[jasanton]

And in the last exaple I don''t understand the latest:
0.005 --> 0.00
I think it's a typo, should be
0.004 --> 0.00

[jasanton]

"Eg total pay 1,201 medicare tax is calculated as 17.41 instead of 17.42"
What I had in the first post was a Total pay for 1 employee, not all of employees.
The other employees' numbers were were correct to the cent.
And the program calculated medicare tax for that employee the way I present there.
I'm sorry I wasn't clear.
Could you check that please?
John

[Paul Mayer]

And in the last exaple I don''t understand the latest:
0.005 --> 0.00
I think it's a typo, should be
0.004 --> 0.00

My typo. My mind is going too fast for my fingers.:)

[Paul Mayer]

"Eg total pay 1,201 medicare tax is calculated as 17.41 instead of 17.42"
What I had in the first post was a Total pay for 1 employee, not all of employees.
The other employees' numbers were were correct to the cent.
And the program calculated medicare tax for that employee the way I present there.
I'm sorry I wasn't clear.
Could you check that please?
John

I winder what calculator you are using? The calculator needs to be set to 5/4 which is standard bank rounding. And on my calculator set to that 1201 * 1.45% is 17.41.

PayWindow comes up with that number too.

[jasanton]

Thank you Paul!
You are absolutely right and thank you for pointing out to the calculator.... The slider for rounding was set wrong and I was getting wrong numbers why doing my calculations at hand.
Thank you for your prompt responses and time!
Zpay remains correct again....
My apologies for the confusion -
John