Now that the Lame Duck session of Congress has addressed income tax changes for 2011, we can plan for updating Solomon / Dynamics SL at year-end. The IRS has released a document that reflects the changes that will be in effect for 2011, which you can read here Withholding Information. Updating the system for the new year includes some extra steps this year, so here is a list of all the necessary steps for the changes at the federal level below. All the steps below must be completed before you perform your first payroll calculate for checks dated in 2011.
- Before making any of the following changes to the Payroll system, close payroll for the year using the G/L closing screen.
- Unmark all W-11 (HIRE Act) employees as the HIRE Act was not extended into the new year.
- Change the description of the EIC earnings type to “Do Not Use” as the Earned Income Payroll Advance policy has been cancelled by the IRS. (The employee can still claim the Earned Income Credit on next year’s income tax return.)
- Update the Employee FICA deduction to show 4.2% instead of 6.2%. Note the difference this will make in balancing your tax deposit now that the employee deduction does not match the employer deduction.
- The FICA maximum wage limit did not change for 2011.
- There were no changes in the Medicare deduction.
- Update the Federal Income Tax personal exemption from $3650 to $3700.
- Update the Federal withholding tables per the third page of the Withholding Information document.
- The maximum contribution to 401(k) plans, including the catch-up contribution, has not changed (see http://www.irs.gov/pub/irs-tege/cola_table.pdf).
The 2010 Year-End updates have been published by Microsoft and can be accessed on CustomerSource under Support/Tax Updates. These changes apply to 6.5 Service Packs 2 and 3 and all versions of 7.0. Please contact Support if you would like assistance in installing these changes. The year-end changes can be installed at any time and are not dependent upon closing the payroll year.
With respect to some of the changes in W-2s and 1099s that were included in the Affordable (Health) Care Act passed this year:
- The IRS has announced that it is optional for employers to report the cost of coverage of employer-sponsored group health on the W2s in 2010. This value will be required on the 2011 W-2s, though it does not represent taxable income to the employee. See http://www.irs.gov/pub/irs-drop/n-10-69.pdf for more information. The Microsoft year-end updates do not contain support for reporting this cost this year.
- The expanded requirements with respect to 1099s are applicable to payments made after December 31, 2011 (see http://www.irs.gov/pub/irs-drop/n-10-51.pdf), so there is no specific action that will need to be taken in the coming year with respect to expanded 1099 reporting. However, if you do not have Taxpayer ID numbers for all your vendors, the coming year would be a good time to update your records. As outlined in the IRS publication that is linked to above, there are numerous issues that the IRS has yet to address with respect to the implementation of this new reporting requirement before we will know fully how to proceed with the data-collection and reporting for 1099s in 2012.
As always, the SWK Technologies support team is available to assist you with questions on this or any other Dynamics SL topic.
