Payroll - Pre-Tax Deductions

[acctgtj]

Hi,

My church has a SIMPLE IRA pension plan, and the employees can elect to make pre-tax deductions into their IRA. This pre-tax deduction should reduce the employee's taxable wages. However, when calculating the federal tax withholding and New York State tax withholding, PowerChurch is not reducing the salary amount by the pre-tax deduction before calculating the taxes. I just found this out when I printed the 2005 W-2 forms.

I will have to manually adjust the 2005 W-2 forms to reflect Box 1 wages as reduced by the total amount deducted.

I don't see anywhere in the payroll module of PCP+ where I can set a deduction up and mark it as not taxable for federal income taxes, but taxable for FICA taxes.
If I am correct that you can't do this, then this is something that should definitely be corrected in PCP+. Not all deductions are after-tax and PCP+ needs to be able to distinguish and calculate payroll taxes correctly based on the different types of deductions.
If there is a way to do this in PCP, please let me know where to set it up correctly. Thanks.

Tom

[tborgal]

When you set up your item description in the payroll module select W-2 information tab and select all appropriate boxes, which would be boxes 3,5 and 12. Enter the proper IRS code in the box next to item 12 and I think you need to make this a capitol letter. This should resolve your problem for '06.

[acctgtj]

Hi,

Thanks for your reply, however, I don't believe what you described is the correct procedure. Here's a scenario that I am trying to accomplish in Power Church:
Gross Pay: $500.00
Pre-Tax deduction: $20 (Pre-tax for Fed. Income tax / taxable for FICA)
Taxable Wages: $480

For W-2 purposes, if I were to check boxes 3 and 5 in the set-up for the deduction, then PC+ will report Social Security and Medicare wages as $520, which is incorrect and overstated. What I want is Box 1 to report wages of $480, boxes 3 and 5 should report wages of $500.

There are three possible deduction types for payroll:
1. Pre-tax for both fed. income tax and FICA
2. Pre-tax for fed income tax but taxable for FICA
3. After-tax deduction.

It is the first two types of pre-tax deductions that Power Church is not designed to handle...and I have both types of deductions for the church employees.

It looks like I'll have to manually adjust the W-2 reportable wages at the end of the year, as Power Church is not designed to properly handle and record pre-tax payroll deductions.

[Zaphod]

This article may be useful to you: http://www.powerchurch.com/support/answ ... icle_id=17