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DELETE: Payroll tax deferral setup and tracking

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Summary

On Saturday, August 8, 2020, the President of the United States issued an Executive Order which directs the Department of the Treasury to defer the withholding, deposit, and payment of the tax imposed by 26 U.S.C. §3101(a), and much of the tax imposed by 26 U.S.C. §3201 as is attributable to the rate in effect under 26 SC 3101(a), on wages or compensation, as applicable, paid during the period of September 1, 2020 through December 31, 2020. To read the Executive Order in full, click here: https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/ . IRS Notice 2020-65 was released on August 25, 2020, providing guidance associated with the payroll tax deferral. To view the notice click here: https://www.irs.gov/forms-pubs/form-w-2-reporting-of-employee-social-security-tax-deferred-under-notice-2020-65 . Section 274 of the COVID-related Tax Relief Act of 2020, enacted on December 27, 2020, as part of the Consolidated Appropriations Act, 2021, extended the end of the time period during which employers must withhold and pay the amount of the deferred Social Security tax from April 30, 2021, to December 31, 2021 . In response, Treasury and the IRS issued Notice 2021-11 modifying Notice 2020-65 to provide that the due date to withhold and pay the deferred amount of the employee portion of Social Security tax is postponed until the period beginning on January 1, 2021 and ending on December 31, 2021 . To view Notice 2021-11, click here: https://www.irs.gov/irb/2021-11_IRB . The Social Security tax for 2020 is 6.2%, which can be deferred from Sep 01 – Dec 31, 2020 per IRS guidelines. Assuming wages of $4000.00 in a bi-weekly pay period and nine bi-weekly pay periods ending Dec 31, 2020, an employee can potentially defer $2232.00. This amount will need to be re-paid between Jan 01 – Dec 31, 2021. The employer is responsible for deducting this from the employee’s paycheck during this period. After Jan 01, 2022, any amounts unpaid may result in interest, penalties, and additions to taxes as outlined in the above notice from the IRS. As an employer there may be accounting and legal considerations to address, please check with the applicable professionals as the regulations are evolving. You should also: Ensure your employees understand that the deferred Social Security taxes will need to be paid back between January 1 and December 31, 2021. Note: This amount may be paid back by withholding twice the normal amount between January 1 and December 31, 2021, or by any other means your organization decides Have in place a plan for repayment, including wage changes, or an employee leaving the company before the full amounts are paid back. The updated Form 941 for Q3 has been finalized by the IRS and is now available via an automatic payroll forms update. If no employees have utilized the FICA deferral in Q3 the prior form may be used. There are instructions below for configuring Sage 50 US to handle deferrals and track the separate amounts for reporting purposes later.

Description

Cause

Resolution

CAUTION: Sage support can't assist with third-party products, hardware, report customizations, or state and federal tax questions. Refer to our Scope of Support for more info. Contact your Sage business partner, network administrator, or accountant for assistance.

First, a separate field will need to be created to track the Payroll deferrals for the employee share FICA.

All Employee Defaults Setup

  1. In the product, from the Maintain menu, select Payroll, Employee Defaults.
  2. The Employee Defaults window appears. Click the Employee Fields tab.
  3. In the next available/blank field, place your cursor in the Field Name field and type:
    FICAdef (Note: Another name for the field can be entered if so desired, i.e., SocSecDef, within the allowed character limitations).
  4. Place a mark in the box under the Memo column. The deferrals will not be recorded on any General Ledger accounts.
  5. If you wish to make this calculation effective for ALL employees, place a mark in the checkbox under the Calc column. Otherwise, click OK and proceed to the next section.
  6. Under the Formula column, place your cursor in the field, click the magnifying glass and select FICA EE from the dropdown list.
  7. Click the button under the Adjust column.
  8. The Calculate Adjusted Gross window appears. On the left, place a mark in the checkbox under the Use column in the Gross field.
  9. Remove the mark from the box in the Calc column for the regular FICA EE field to remove the calculation from Payroll runs.
    Important: You will need to enable this calculation before running the first payroll run for calendar year 2021.
  10. Click OK.
  11. You are returned to the Employee Defaults window. Click OK.

Individual Employee Setup

If you have employees that desire to have the deferrals added to their net pay, ensure that you have followed steps 1 through 5 in the first section.

  1. From the Maintain menu, select Employees/Sales Reps.
  2. Select the employee record that needs to be configured for the deferral.
  3. Click the Employee Fields tab and click the box under the Use Defaults column for the FICAdef you setup in step 3 of the previous section to remove the mark.
  4. Click the Calculated box on the same row under the Formula column, place your cursor in the field, click the magnifying glass and select FICA EE from the dropdown list.
  5. Click the button under the Adjust column.
  6. The Calculate Adjusted Gross window appears. On the left, place a mark in the checkbox under the Use column in the Gross field.
  7. Click OK.
  8. Remove the mark from the box in the Calc column for the regular FICA EE field to remove the calculation from Payroll runs.
    Important: You will need to enable this calculation on each modified Employee record before running the first Payroll run for calendar year 2021.
  9. Repeat steps 1 through 7 for each employee record. Click OK.

Reporting FICA amounts for entry on Q3/Q4 Form 941

  1. Click on Reports & Forms, Payroll from the top tool bar.
  2. Select the Payroll Register report.
  3. Click on the Options button at the top and select the appropriate reporting dates and check the Show only totals box, and click OK.
  4. Locate the FICADef field created to track the FICA deferral amounts.

Note: FICA deferral amounts must be manually entered into the Q3/Q4 941 form, they will not be pulled automatically from Sage 50.

Note: For additional assistance customizing reports and/or creating documents please contact your Consultant or Business Partner.


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