More Rounding Trouble on Form 941

[BCVolkert]

Hi Paul,

I use PayWindow to compute entries for paychecks that I enter in QuickBooks monthly. I compare the sum of individual deductions for all employees in the period to the totals provided in the Employeer's Payroll Total Report (Federal). To assure that the total of liabilities in QuickBooks agrees with PayWindow, I make rounding adjustments to the company portion of one employee in QuickBooks such that the total liabilities for each of FICA and Medicare are equal to their counterparts in PayWindow's Employeer's Payroll Total Report (Federal). These adjustments are never more than a penny or two. On the basis of these calculations, I pay the IRS using EFTPS monthly.

In the second quarter, PayWindow's monthly Employeer's Payroll Total Report (Federal) / Employeer Federal Liablities / Employee & Employeer FICA were 323.70, 265.10, and 284.23 totaling 873.03. However, the QTD column shows 873.02. I'm not sure where that comes from, but it may be the sum of a rounded Employee Contribution and a rounded Employeer Contribution. Since I pay monthly, the total of 873.03 has been paid and should not really contribute to any rounding error.

On the 941 Form from PayWindow, 941 Line 7 shows a rounding error of -0.03. I believe that Medicare correctly accounts for -0.02 of this. However, the remaining -0.01 seems to be erroneously attributed to FICA.

PayWindow gives us the opportunity to adjust 941 Line 11, but does not provide the opportunity to adjust 941 Line 7.

I think that 941 Line 11 must agree with the payments that have been sent to the IRS and needs to remain accessible to the user. Similarly, 941 Line 6e is an artifact of the historical values that occupy 941 Line 2 and 941 Line 3. It seems to me that 941 Line 2 through 941 Line 6e are effectively fixed by the facts.

The purpose of 941 Line 7 appears to be a method to get around all the confusion created by calculations at the paycheck level and liabilities accruing at the quarterly aggregate level. Nobody wants to write a check or make QuickBooks entries to deal with a few pennies and I suspect that the IRS shares this aversion for their own reasons.

I think the solution to the problem may be user access to the 941 Line 7 that, along with the current control of 941 Line 11, will faclitate the correct calcuation of 941 Line 14. In this manner, we will have the ability to get an accurate 941 for use with the IRS regardless of the accumulated rounding errors of PayWindow or if the QuickBooks entries have not been made to reconcile each pay period (in my case they do reconcile, but it is a lot of work and I doubt if all are as tragically obsessive as I am).

Or, did I miss something?

Bruce

[Paul Mayer]

See this FAQ Bruce as it is from the 941 Form instructions, the IRS expects rounding:

http://zpay.com/vbulletin/showthread.php?3198-Rounding-of-Employee-FICA-and-Medicare-is-Expected

Of course, you can edit the 941 form in Adobe Acrobat if you are as obsessive as you said you are. :)

[BCVolkert]

Paul,

A couple of year's ago, I begrudgingly accepted your response to my post above. I totally understand the source of the rounding error and that it is somewhat inevitable when we make payments to employees one pay period at a time and incurr liablitlies to the IRS on a monthly basis that we account for quarterly in aggregate instead of as a sum of transactions. That is the thrust of the thread you referenced.

However, I just spent another few hours dealing with the rounding errors that I believe are in the PayWindow FICA calculations. This quarter, the QTD on the Employeer's Payroll Total Report for Medicare was 243.20 and the 941 5c Column 2 quotes 243.18. The rounding error provided by PayWindow on the 941 was 0.02. Consequently, I think that PayWindow does the calculation for Medicare correctly. However, the individual pay Period numbers for on the Employeer's Payroll Total Report for Employee and Employer FICA do not sum to the total provided as QTD for the same entry in the last report for the quarter. Since the QTD is not accurate, PayWindow does not know that the Rounding Error has occurred for the FICA and does not include it in the 941 on Line 7. This is probably the root of the error in the entry for Line 7 on 941.

If 1) there are no input errors in PayWindow, 2) payments are made to employees and the IRS in accordance with PayWindow recommendations, and 3) the rounding error is solely a function of the PayWindow calculations for paychecks and monthly obligations, the net result should be a rounding error on Line 7 that results in a 0 Balance Due on Line 14.

The remedy offered in your pervious post in this thread is to adjust Line 11. However, this really is not appropriate because the payments to the IRS have already been made and are a historical fact at the time the 941 is filled out.

There are probably some good reasons for Line 11 (making a mistake in a payment etc) that happen outside of PayWindow's world. If I just use Line 11 as suggested in your post, I end up with a Balance Due of -0.01. Then I get figure out how best to deal with that through how many additional hours of chasing a silly penney. I suspect that it does not work to tell the IRS you paid XXXX.02 when you really paid XXXX.01. They seem to be ok with varying the obligation to match the payments (Line 7); but, seem to take a pretty dim view of telling them you did one thing when you actually did another with the cash.

The problem with the rounding error calculation is that it is incorrect and you don't provide the user with an opportunity to fix it. From PayWindow's perspective, the rounding error should be the aggregate difference of the payments PayWindow has advised in pay period transactions and in the Employeer's Payroll Total Report.

It seems to me that you should fix the calculation of the rounding error such that the 941 is OK and results in a 0 Balance Due on Line 14 when paychecks are incompliance with PayWindow's recommendations and payroll liablilties are settled each pay period in accordance with the recommendations of the Employer's Payroll Total Report (Federal). Alternatively, you can provide user access to Line 7 so that we can be truthful in the reporting of payments and mitigate the effects of the rounding error in the appropriate place on the form.

I know I can edit the 941 directly and change all the numbers to whatever I want them to be. However, I think you will agree that that's not really the objective of automated computing. It does not help, that I can't save the 941 form with the changes even if I made them.

In reading the post above, I realize that it is a very tedious read. However, I hope that by pointing out the specifics of what I've learned in identifying this problem that you can efficiently locate and address the issue in PayWindow.

[Paul Mayer]

The 941 audits the stored payroll transactions. And the fraction of cents is OK as long as it is pennies. But every once an a while a user will do a manual payroll entry and transpose some numbers or a number of other things and in that case the fraction of cents is dollars and not a penny or two. When it is a penny or two this is normal and expected as you saw in that FAQ I provided. But when you have dollars it is a problem and you need to find and rectify the problem.

You can edit the entries in the 941 Form, but it is not necessary when it is just a few cents as it is just reporting the fraction of cents difference and is expected by the IRS and does not affect your payments that you made.

With almost 9,000 users of PayWindow, no one is getting letters from the IRS as this is normal practice.