Prior to closing the year in Payroll Period End Processing, it is recommended to reconcile the Quarterly Tax Report. Steps provided in this article are not to be construed as tax advice. Consult your CPA or tax professional for guidance related to earnings, subject wages, pre-tax deductions, cafeteria and pension plan deductions.

1. RECONCILE QUARTERLY TAX REPORT GROSS WAGES TO EARNINGS REPORT

Gross wages on the Quarterly Tax Report should equal Gross Wages on the Earnings Report.

Quarterly Tax Report:

1 Open Payroll, Reports, Quarterly Tax Report.

2. Select Year 2020 and Quarter 4.

3. Use the Federal Totals page for comparing to the Earnings Report.

Earnings Report:

1. Open Payroll, Reports, Earnings Report. Generate the report for the 4th quarter when using for year end reconciliation.

2. Use Year to Date Amounts for Cafeteria and Pension Plan Deductions only. (Report shown was created for demonstration purposes only.)

2. RECONCILE GROSS WAGES TO SUBJECT WAGES

General reconciliation tips:

- Subject wages are the wages subject to the tax.

- Gross wages are reduced by pre-tax deductions IF a tax rule that reduced taxable wages was used.

- Gross Wages Less Pretax Deductions = Subject Wages.

For Example:

- Federal Wages (taxable) are reduced by Cafeteria and Pension Plan Deductions

- Social Security wages are reduced by Pension Plan Deductions.

- Medicare wages are reduced by Pension Plan Deductions.

- State Wages are often reduced by Cafeteria Plan and Pension Plan Deductions.

TIP: Use the Tax Rule Inquiry utility to see how your Tax Rule selections will impact the treatment and categorization of wages paid and deductions taken. See KB 95959 How to use Payroll Tax Rule Inquiry

NOTE: Emergency Pay (Covid) wages are not included in the Employee and Employer Social Security Wages and must be added to reconcile gross wages to subject wages. Emergency Pay wages are on a separate page in Quarterly Tax Report.

KNOWN ISSUES

- If payroll checks were reversed using the manual method (manually entering negative amounts and not using the one-click reversal button), subject wages may be incorrect in employee tax summary. See KB 101151 Wages may be incorrect if the legacy method of reversing a payroll check issued in Payroll 2.x
- Differences may exist if tax rules selected for deductions did not reduce wages as expected or if the tax rule on a deduction was changed during the year. Use KB 101868 How to edit employee wage and tax history in Tax Summary.

***Make a backup of your company prior to making changes in Tax Summary***

3. RECONCILE TAX CALCULATIONS ON QUARTERLY TAX REPORT

Using the FEDERAL TOTALS on Quarterly Tax Report reconcile Calculated Totals to Liability Totals. Calculated Totals is the Total Subject Social Security and Subject Medicare Wages multiplied by the Rate. Liability Totals the amounts posted to payroll history by updating Payroll Check Registers.

NOTE: Amounts may be off by pennies due to rounding

EXAMPLE:

Q4 Employee and Employer Social Security Wages = $2,030.00 x 6.2% = $125.86

Q4 Employee and Employer Medicare Wages = $3,480.00 x 1.45% = $50.46

YTD Employee and Employer Social Security Wages = $8,990.00 x 6.2% = $557.38

YTD Employee and Employer Medicare Wages = $10,440.00 x 1.45% = $151.41

IMPORTANT! If Calculated Tax Totals do not agree to Tax Liability Totals additional research should be done. Tax forms may not reconcile and may be rejected if taxes do not agree.

NOTE: Rounding will cause small discrepancies in these amounts.

KNOWN ISSUES:

- Use of the 'manual taxes' setting during payroll entry to post amounts that are incorrectly calculated.

- Payroll Product Update 2.20.0 was found to have a defect and was corrected with a HotFix and was corrected in 2.20.1.0

Use the Quarterly Tax Report to determine which Employees have a discrepancy of more than .05 between calculated tax and the tax withheld. Look for Employees with an asterisk [*] in the VAR column on the Quarterly Tax Report.

Checks and taxes withheld can be viewed from the #8 Pay History tab in Employee Maintenance.

TIP: Run the Quarterly Tax Report for individual employees for ease in reconciling

TIP: Liability Totals agree to amounts withheld from Employees

4. RECONCILE QUARTERLY TAX REPORT TO FORM 941 IN FEDERAL & STATE TAX REPORTING

Wages and Taxes on Quarterly Tax Report are pulled through to tax forms in Federal & State Tax Reporting. This section shows where the amounts on the quarterly tax report display on the Form 941. Line numbers on the Form 941 are shown on the Quarterly Tax Report. Tax amounts are color matched between the two reports.

5. RECONCILE QUARTERLY TAX REPORT TO FORM W-2 IN FEDERAL & STATE TAX REPORTING

Wages and Taxes on Quarterly Tax Report are pulled through to tax forms in Federal & State Tax Reporting. This section shows where the amounts on the quarterly tax report display on the grid when processing Form W-2. Box numbers on the grid for Form W-2 are shown on the Quarterly Tax Report. Tax amounts are color matched between the two reports.

DocLink: Wages may be incorrect if the legacy method of reversing a payroll check is used in Payroll 2.x
DocLink: How to edit employee wage and tax history in Tax Summary
DocLink: How to copy company data into another company in Sage 100
DocLink: How to use Payroll Tax Rule Inquiry