Was there a reduction in Federal withholding rates for March?

[echelon3]

I pay my wife once a month. The net pay for March 2021 is higher than for either January or February 2021, with a reduction in federal withholding.

I've crawled my settings to see if I inadvertently changed anything to no avail. Did anyone else notice a reduction in Federal withholding for March?

[Paul Mayer]

Yes, if you have the recent Tax Update from yesterday see this update description:

https://zpay.com/vbulletin/showthread.php?4917-Tax-Tables-Update-March-13-2021

Your wife will get a bonus at the end of the year when you file your taxes.

[echelon3]

Thank you, Paul.

I want to tell you how much we appreciate both the program and your support. Both are excellent!

[Paul Mayer]

You are so very welcome!

[Wendell Lenhart]

I pay my wife once a month. The net pay for March 2021 is higher than for either January or February 2021, with a reduction in federal withholding.

I've crawled my settings to see if I inadvertently changed anything to no avail. Did anyone else notice a reduction in Federal withholding for March?

I noticed the same thing. All of my employees had significant amount of federal tax that was not withheld like the first two months of 2021

[Wendell Lenhart]

So the employees will see a net increase in the their checks as the result of the tax table change on March 13. How will they receive a bonus at the end of the year when they are having less federal tax withheld? Won't that cause them to have to pay when they file their taxes next year instead of getting a refund?

[Paul Mayer]

So the employees will see a net increase in the their checks as the result of the tax table change on March 13. How will they receive a bonus at the end of the year when they are having less federal tax withheld? Won't that cause them to have to pay when they file their taxes next year instead of getting a refund?

The bonus is the preview tables were deducting too much FIT that they will get back when they file their taxes at the end of the year Wendell.

[ericmc]

This is where I hate not knowing everything :D

How can I confirm I am withholding enough? As an example, on a $500/wk paycheck, i withheld roughly $45 in Federal for the past years and first two months of this year. Now its roughly cut in half. I hadn't heard of any tax cut that reduces withholdings (my ignorance). I would hate to get to the end of the year and find that I didn't withhold enough and then I have to cover any shortfalls for all my employees.

[Paul Mayer]

Please see the tax update notice at this link:

https://zpay.com/vbulletin/showthread.php?4917-Tax-Tables-Update-March-13-2021

Then since you don't trust the numbers::

Download Publication 15-T from the IRS Website and you can confirm the amounts.

[BenH]

Hi Paul, I'm new to this. Could you please post the 15-T with the basis for the 3/13/21 withholding update? I cannot find it on the IRS website. All I see is a 15-T that supports the pre 3/13 withholding rates. Thank you for your help.

BenH

[Paul Mayer]

Hi Paul, I'm new to this. Could you please post the 15-T with the basis for the 3/13/21 withholding update? I cannot find it on the IRS website. All I see is a 15-T that supports the pre 3/13 withholding rates. Thank you for your help.

BenH

Here is the link to the file on the IRS Website:

https://www.irs.gov/pub/irs-prior/p15t--2021.pdf

[BenH]

Thank you Paul. To be clear, should the "Federal Tax Table" in the software under Tools-Federal Tax Table-Married Filing Jointly match the 2021 Percentage Method Tables for Automated Payroll Systems on pg 6 of Pub 15-T.

Again, I'm new to this so pls excuse the ignorance.

[Paul Mayer]

Thank you Paul. To be clear, should the "Federal Tax Table" in the software under Tools-Federal Tax Table-Married Filing Jointly match the 2021 Percentage Method Tables for Automated Payroll Systems on pg 6 of Pub 15-T.

Again, I'm new to this so pls excuse the ignorance.

No we used page 55 which has the 2021 Percentage Method Tables for Manual Payroll Systems With Forms W-4 from 2020 or Later MONTHLY Payroll Period.

We converted the Monthly to Annual figures to create the tables.

[BenH]

Thank you Paul. Something is not working with our software. Post the 3.13.21 update, we have an employee whose Federal withholding went down by $113. The software now shows his federal withholding to be less than his state withholding. I've filled out the worksheet from the IRS 15-T and arrived at the pre 3/13/21 withholding number for him. We have used this software for 15+ years, and have never seen this much variability in withholding. Can you please help us figure this out.

[Paul Mayer]

We use the formulas on pages 52 to 56 in Publication 15-T.

[CRANMIKE]

Hi Paul, i see there is a reduction in the federal tax rates but I pay a couple of employees 675 once a month and for march it took out 0$ for federal tax. Can this be correct?

[Paul Mayer]

Hi Paul, i see there is a reduction in the federal tax rates but I pay a couple of employees 675 once a month and for march it took out 0$ for federal tax. Can this be correct?

Actually a person earning only 675 a month is not earning enough to pay FIT, they would need to earn $2092 before taxes are deducted. Please go to this link below though to be sure you do have everything set up properly using the 2021 W4 Forms from your employees.

https://zpay.com/vbulletin/showthread.php?4917-Tax-Tables-Update-March-13-2021