Tax Table Rounding Off Option

[Kristi]

Last year I thought it would be easier to fill out my monthly tax forms if I rounded off the paychecks and tax tables. (Turned out I was wrong...one rounds off & the other doesn't)

Last week our secretary came in very anxious because her accountant told her; since I rounded off everything her withholding amounts were not exact. If they are not exactly correct she could get audited. This really upset her. She had to sign a form and write my name as her work bookkeeper. I had to figure out & correct the problem before I wrote her Feb. check.

Since I had rounded off again this year, I had to go refigure all of January's non-rounded amounts and adjust what the taxes would have been to Feb's payroll. Then changed all my tax tables back to not being rounded off. I hope no-one else encounters this situation.

So, who needs to Round off and does this option need to be available on PowerChurch?

[Jeff]

I believe Colorado requires state taxes to be rounded to the nearest whole dollar. I remember years ago having to make this change for Colorado customers.

I don't know why her accountant would even tell her this. What an employer withholds from paychecks are never exactly what someone pays in taxes at the end to the year. There are many things that will change the amount of someone's tax. Even if it was exact, we are talking about a relatively small amount. If she was paid weekly the biggest difference rounding would make would be: $25.48. (52 weeks rounding down .49)

Looking at the Circular E (IRS publication 15) http://www.irs.gov/pub/irs-pdf/p15.pdf page 38 under the section titled: Whole-Dollar Withholding and Paying Advanced EIC. It says:

When employers use the Percentage Method... the tax for the pay period may be rounded to the nearest dollar.

The tax amounts would be even further off if you had used the Wage Bracket tables instead of the Percentage Method tables that PC+ uses.

[Kristi]

Thank you! I just printed your response for her.

[Kristi]

Secretary is still not satisfied. She stressed that your reponse was for Fed taxes only & she knows anyone can set up what they want witheld from their paycheck. She reiterated that Social Security and Medicare have to be exact or she can get audited.

Anyway, I appreciate what you wrote. Thank you

[Jeff]

I didn't realize we were talking about just Social Security & Medicare taxes. They should not be rounded.

[Kristi]

I didn't either at first. O.K., but it is an option in Maintain Tax Tables.
Thank you