FICA Expense

[sweettea]

I am setting up powerchurch from a hand written system. I put the FICA employee matching part as an expense. Since we only pay monthly it shows the amount I paid in October to the IRS plus the employer matching from the payroll this month. Is this correct to show that in the expense account?

[NeilZ]

I am setting up powerchurch from a hand written system. I put the FICA employee matching part as an expense. Since we only pay monthly it shows the amount I paid in October to the IRS plus the employer matching from the payroll this month. Is this correct to show that in the expense account?

No, employEE FICA is a deduction that should be taken out of the employee's salary which then shows up in the Social Security liability account. The employER FICA is a matching amount that comes out of an expense account, and then is put in same liability account as the employee's deduction. The Medicare withholding, and employee match can go in that same liability account or a separate liability account.

There should be separate pay items in Payroll for employEE Social Security tax and Medicare tax, as well as employER. The system then calculates the taxes from the individual Social Security & Medicare tax table.

Then there's any Social Security Offset amounts some churches give to the pastor, since they file as self-employed, and pay SECA taxes. That's an expense, but is considered taxable to the employee. Just wanting to get all this Social Security stuff out there, not knowing if your church does this or not.

Are you using the Payroll Setup Assistant to setup the Payroll ?? Information on this can be found in the PCPlus 11.55 manual on page 273. It is MUCH easier to do this than to do it manually. The manual starting on 273 explains each step needed when setting up payroll.

If you have questions please ask.

[sweettea]

Yes I used the payroll assistant and put the employer part to an expense account. The expense account has all the payroll from this month (the employer part) and what was paid on October 15 to the IRS. When the other person who is doing it by hand gave me her report, she only has the amount that was paid to the IRS on October 15. In powerchurch I have that amount plus all the employer part from the payroll from this month. Is that correct?

[NeilZ]

Yes I used the payroll assistant and put the employer part to an expense account. The expense account has all the payroll from this month (the employer part) and what was paid on October 15 to the IRS. When the other person who is doing it by hand gave me her report, she only has the amount that was paid to the IRS on October 15. In powerchurch I have that amount plus all the employer part from the payroll from this month. Is that correct?

OK ... the only expense to the church is the Employer match on the SS & Medicare. And frankly, when the check is written it should NOT be written against an expense account, but a LIABILITY account.

The pay item list in the PAYROLL module for each employee that gets Social Security & Medicare deducted from their pay, should show the following pay items (you find this under Accounting -> Payroll -> Maintain List of Employees then open the PAY ITEMS tab

Employee SSI
Employee Medicare
Employer SSI
Employer Medicare

These should be separate as the Employee pay items are deductions while the Employer pay items are Employer liabilities.

The Employer & Employee SSI pay items should reference the Social Security Tax Table, while the Medicare items should reference the Medicare tax table.

The pay items are created under the Accounting -> Payroll -> Setup -> Maintain Item Descriptions menu item. If you look at the pay item for Employee SSI, it should show a TYPE of Tax Deduction, it should then connect to the Liability Account for Social Security. list a TAX TYPE of Social Security, and a Vendor of IRS (if you have that setup)

The Employer SSI should show a TYPE of Employer Liability, it should list TWO accounts, a LIABILITY account (Social Security) and an EXPENSE account (Employer Payroll Taxes). The TAX TYPE should be Social Security, and again the vendor should be IRS.

When the employee is paid, the system will automatically figure out the deductions from the employee, and the employer amount. It will create the transaction to credit the Liability account with the amount from the employee, and will DEBIT the Expense account and CREDIT the Liability account for the amount of the employer match.

The only amount that should be shown as an expense from the Employer Payroll Taxes expense is the matching amount. If the person gets paid twice a month, there will be two DEBITS from that expense account on the 15th and end of the month. If the person is paid once a month, the debit will be seen at the end of the month.

When you pay the IRS, either by check, or by Electronic Funds Transfer, the only account that should DEBITED in any way is the Social Security Liability account which will be debited for the entire amount of Social Security taxes both Employer & Employee.

In other words, if you're paying your Social Security payroll tax check/EFT out of the EXPENSE account, you're doing it wrong. Especially if you're paying the TOTAL amount you send to the IRS!

Does this help ??

[sweettea]

I have the SS & Medicare setup in payroll as

01-2450-00 - FICA Liability
01-5221-00 - FICA Expense

Is that correct?

So when I pay the Tax deposit does it comes from the 2450 account (liability) or the 5221 account (expense)?

[NeilZ]

I have the SS & Medicare setup in payroll as

01-2450-00 - FICA Liability
01-5221-00 - FICA Expense

Is that correct?

So when I pay the Tax deposit does it comes from the 2450 account (liability) or the 5221 account (expense)?

As I noted above, when you Process Payroll in Powerchurch, and you have the proper pay items setup for each employee that has FICA taken out, when you POST PAYROLL the system will automatically create the transaction that moves the funds to the liability accounts.

When you pay your Monthly Federal Withholding Deposit the check should be using the Liability Accounts 01-2450 for the FICA (SS & Medicare), and whatever liability account you use for Income Tax Withholding. You SHOULD NOT be accessing the expense account when you do your tax deposit.

Again, I AM ASSUMING that you're running the Payroll in Powerchurch, you are right?

[sweettea]

Thanks so much for all your help!!

When I pay from the liability account will their be any amount be in the 5221 - FICA expense account on my income statement monthly?
If so do I ever do anything with it?

[NeilZ]

Thanks so much for all your help!!

When I pay from the liability account will their be any amount be in the 5221 - FICA expense account on my income statement monthly?
If so do I ever do anything with it?

I really can't give an answer to that, as you haven't told me whether your running payroll through Powerchurch or doing everything manually.

I have been assuming that you're using powerchurch to process the payroll. If you're not, then that is a COMPLETELY different scenario.

[sweettea]

I'm sorry I thought I had said it already. Yes we are running our payroll and everything through Powerchurch as of October 1st. I have set up everything I think according to the manual, just trying to double check to make sure I am right.

[NeilZ]

I'm sorry I thought I had said it already. Yes we are running our payroll and everything through Powerchurch as of October 1st. I have set up everything I think according to the manual, just trying to double check to make sure I am right.

OK .. if its setup correctly, you don't have to do a thing, The system will do all the work, and you'll see the expense show up in the monthly Income & Expense Report.