additional ? re 941 and Powerchurch

[tbcbrown]

On the maintain list of employees pay items, the ss and medicare for both employee and employer was set at manual with no amounts; therefore for the month of May and June and July, there was none taken out of check. The individual who is supposed to check for accuracy apparently didn't check close enough to question this. She said she just thought there was none calculated to be deducted. There should have been $82.67 SS and $19.33 Medicare taken out. This individual gets paid by the month and there have been three paychecks issued so the total employee ss is $248.01 and the total medicare is $57.99 plus same for employer. As I previously stated, we do not wish to penalize the employee. It will be corrected next pay period so she will see less take home. This is going to be hard enough for her.

[NeilZ]

On the maintain list of employees pay items, the ss and medicare for both employee and employer was set at manual with no amounts; therefore for the month of May and June and July, there was none taken out of check. The individual who is supposed to check for accuracy apparently didn't check close enough to question this. She said she just thought there was none calculated to be deducted. There should have been $82.67 SS and $19.33 Medicare taken out. This individual gets paid by the month and there have been three paychecks issued so the total employee ss is $248.01 and the total medicare is $57.99 plus same for employer. As I previously stated, we do not wish to penalize the employee. It will be corrected next pay period so she will see less take home. This is going to be hard enough for her.

The problem is this. If you cover the employee's funds and not expect pay back, you have to declare them as income to her, however, you could give her a 'no interest' loan to pay the SS & Medicare taxes and take out $25 a month until its paid off in about six months.

That is going to have to be in a separate check issued the same day you take out the taxes. The next paycheck, setup a manual deduction for the total SS & Medicare for the employee, as well as the employer. This takes care of the taxs for the W2 and the 941.

Taking it out all at once is probably the best way to do this. Then issue her the separate check to cover that amount coming out of her taxes. Then setup a liability account as listed here: viewtopic.php?f=3&t=6960 to cover the loan and the repayment.

The employee will have to understand that the loan is to cover taxes that were not taken out of her checks for May, June & July. Basically, she's paying those back taxes on the installment plan.

The only other option is to take it all out at once just to get it over with.

[tbcbrown]

I'll have to study this and experiment with it. Thanks so much for your input.

[tbcbrown]

Clarification - do I issue the check and take out the taxes on the same check or separately. If separately, since there won't be any income, the check will be a minus amount. Also if I wait until the next check date to set up the manual deduction, it will be august and not in the 2nd quarter so the 2nd quarter 941 won't reflect the increase??

[NeilZ]

Clarification - do I issue the check and take out the taxes on the same check or separately. If separately, since there won't be any income, the check will be a minus amount. Also if I wait until the next check date to set up the manual deduction, it will be august and not in the 2nd quarter so the 2nd quarter 941 won't reflect the increase??

You're kinda in a rut here.

Since you need this to show up in the 2qtr 941, what I would do is run a special payroll for this employee, dated for 30 june, which:
a. Shows no income
b. Has two Adjustment Pay Items for the SSI & Medicare showing the amounts needed for May & June. This will update the 941.

Then create another special payroll for July's taxes, and do the same. There will not be a check to print, so just print the stub.

Then post to Funds Accounting. In Funds Accounting, if you're going to do the loan Liability account advice in Employee Loan topic, you're going to change the two transactions to change the CREDIT line from the normal checking account to the loan liability account. This will make the liability account show a negative balance, as that loan topic suggested.

Finally, once all this is over, make sure her pay item list in Maintain List of Employees shows the automatically calculated SS & Medicare pay item which "should" be the same as the rest of the employees, so it doesn't happen in the future.

[tbcbrown]

Neil - I pray you can stand another question regarding this process. I got the 941 corrected and trying to do the rest of what you're suggesting. Am I to use the liability loan acct when writing her the check?? She's going to pay it all back in one transaction. So will this just be a debit to checking and credit to liability acct. Thank you so much for helping this poor non accountant.

[NeilZ]

Neil - I pray you can stand another question regarding this process. I got the 941 corrected and trying to do the rest of what you're suggesting. Am I to use the liability loan acct when writing her the check?? She's going to pay it all back in one transaction. So will this just be a debit to checking and credit to liability acct. Thank you so much for helping this poor non accountant.

Don't thank me, I'm only following what seem logical. However something I said earlier is incorrect.

"f you're going to do the loan Liability account advice in Employee Loan topic, you're going to change the two transactions to change the CREDIT line from the normal checking account to the loan liability account. This will make the liability account show a negative balance, as that loan topic suggested."

I rethought that after I read your question above. There really isn't any need to issue a check. If you've created the two transactions as I suggested, after they're posted to Funds Accounting change the normal Checking Account line and change that to reflect the Liablity Account for the loan, and instead of a CREDIT, make it a DEBIT.

The reason I say you don't have to issue a check, is that you're increasing the liability amount that the church will be paying out to the tax agency, that's the actual loan to the employee. With the DEBIT to the Loan Liability you're creating the loan that will be paid back.

You do not issue any funds to the employee, as she was overpaid because the taxes were not withheld.

[tbcbrown]

Will you explain in detail about the two transactions?

[NeilZ]

Will you explain in detail about the two transactions?

As I mentioned above:

Since you need this to show up in the 2qtr 941, what I would do is run a special payroll for this employee, dated for 30 june, which:
a. Shows no income
b. Has two Adjustment Pay Items for the SSI & Medicare showing the amounts needed for May & June. This will update the 941.

Then create another special payroll for July's taxes, and do the same. There will not be a check to print, so just print the stub.

When you post this to Funds Accounting, you would go into the Unposted Transaction queue in FA to make the adjustment I mentioned.