Witholdings

Can I combine withholdings together for box 14?

Yes. Although box 14 only has room for 3 items, you may choose to combine withholdings together. For example, if you had 2 items that were both health care related, and wanted to add them together to appear on one line in box 14, you would enter the same description of HEALTH for both of them when you Map the withholdings (image below). See: Using W2 Software and Can I have more than 3 items in box 14?

Can I have more than 3 box 14 'other' withholdings?

No. The W2 form is limited to a maximum of 3 withholdings for box 14 (other withholdings). This is an IRS limitation based on the size of the form. In most cases box 14 is optional; its purpose, according to the IRS instructions, is “for any other information that you want to give to your employee”. Consider printing the report called “Employee Earning / Withholding Summary” and include it with the W2 for each person. This report gives all the detail anyone should need as to what was withheld for each category.

If you assign more than 3 withholdings to box 14 (using the Procare W2 Software) you’ll get a message stating that only the first 3, with an amount greater than zero, will be included for each employee. Of course you may manually edit the W2s as needed. See also: Can I combine withholdings together for box 14?

Does Procare auto-correct Social Security & Medicare withholdings?

Yes, but it depends on how recently you downloaded tax formulas.

Social Security:
Beginning with version 10.2.4393 (and tax formulas downloaded on or after 01/01/2012) withholdings for Social Security are automatically corrected if too much or too little was withheld on prior checks during the year. This means the amount withheld will not always be an exact percentage, like 4.2 or 6.2%.

Medicare:
Beginning with tax formulas downloaded on or after 9/18/2012 withholdings for Medicare are also automatically corrected if too much or too little was withheld. This means the amount withheld will not always be an exact percentage, like 1.45%.See also: How do I download the latest tax tables?

Form W-4: Employee claims they are 'exempt' from withholdings. How do I handle that?

The federal form W-4 is where employees determine the number of allowances to claim for tax purposes. Some employees may claim they are “exempt” from withholdings. Their earnings are still taxable, but they want nothing withheld. In Procare you simply do not assign the Federal Income Tax withholding to them.

Go to the Employee Withholdings screen:

a. Confirm Federal Income Tax (and possibly State Income Tax) is not assigned to them.
b. If it is assigned, click once on the line to select it and use the Delete button to remove the withholding.

Important! Do not check the “exclude” box. Excluding a tax affects taxable earnings (and the W2).

How do I know I am withholding the correct amount of Federal income taxes?

The easiest way to verify that you are withholding the correct amount from a payroll check is to check the Procare calculation against the IRS Publication 15, commonly known as the Circular E. Computer calculations are based on Table 7 for annual pay. This annual amount is then divided by the number of pay periods per year to determine the amount to withhold from an individual check. Visit the IRS Website to obtain a copy of the most recent edition of the IRS Publication 15 Circular E – Employer’s Tax Guide. Search under Forms and Publications for either “Publication 15” or “Circular E”.

How do I make a withholding pre-taxed or exempt from certain taxes?

A pretax withholding, sometimes referred to as pre-taxed or tax exempt, means the amount is deducted from gross pay prior to taxes being calculated. The amount withheld is not taxed.

Important! Be sure to check with your tax adviser before marking a withholding as exempt.

1. From the Procare Home screen click Configuration > System > Accounting Management > Payroll > dbl-click Payroll Formulas.
2. At the Payroll Formulas screen select the Category “General” from the list (upper left).

3. Click once on the formula you want to mark as exempt, just to select it.
4. Click the Exempt From button (lower left).

5. Check off any items from which it is exempt, then click Save > Exit.

Example:
If your retirement plan is exempt from Federal Income Tax and a person earns 1,000 in gross pay with 100 withheld for retirement; their taxable income would be 900.

How should I delete a general withholding?

If you created or applied a general withholding to an employee, you would go to the Employee Withholdings screen for each person to whom the withholding is assigned and remove it as follows:

Delete a Withholding

1. To delete (or remove) a withholding from a person click once on the name of the withholding to select it.
2. Click the Delete button.
3. Click Exit.

How to Withhold Extra Income Tax

Learn how to withhold additional income tax for employees who want to have an extra amount taken out each paycheck. This is helpful for any employee to reduce the amount they may owe when they file their personal income tax returns.

Nonresident Aliens
Withholding extra is also useful for nonresident alien employees, since the Payroll module does not support automatic calculation of nonresident alien withholding adjustments. See IRS Notice1036 for guidance on how nonresident alien status affects taxable wages.

Withhold Additional Income Tax

For employees who want to have additional income tax withheld from their checks. These steps are for federal income tax, but you may also withhold extra for state income tax.

1. At the main screen of Employee Data & Payroll Look Up an Employee.
2. Click the Withholdings icon (building) on the toolbar.

3. At their Employee Standard Withholdings screen, double-click Federal Income Tax.

4. At the Withholding Editor screen, in the Additional Withholdings row, enter the additional amount (per pay period) the employee wishes to have withheld in the Value column.

I have 2 local withholdings for box 18 on the W2. Should wages for both be added to the W3?

Yes. According to the IRS instructions:

“If the Forms W-2 show amounts from more than one state or locality, report them as one sum in the appropriate box on Form W-3. Verify that the amount reported in each box is an accurate total of the Forms W-2.”

When should I check the 'Exclude' box on withholdings?

Check the Exclude box on the Employee Withholdings screen in the following situations ONLY:

1. To temporarily turn off General Withholdings you create such as employee child care, etc. The withholding will be skipped for any paychecks issued to this person until you return and uncheck the box.

Warning! If you “exclude” a federal or state withholding (income tax, Social Security, Medicare) the taxable earnings (and W2) will be affected. The person’s gross pay will not count toward taxable earnings for either employer or employee paid taxes AND the earnings will not be reported on the W2. In other words, neither party will pay tax on those earnings. This is almost ALWAYS WRONG.
See: How to handle employees who claim “exempt” on form W-4.

2. To permanently exclude a withholding. Used when neither the employee nor employer pay any amount for that person and the earnings are not to be reported on the W2. Talk with your tax advisor before using the “Exclude” checkbox.

I mistakenly checked the 'Exclude' box to prevent taxes from being withheld. How do I correct it?

If you marked “exclude” to prevent taxes from being withheld, the taxable earnings (and W2) will be affected. When a person is excluded it means neither the employee nor employer are required to pay taxes on that amount. If you mistakenly did this for federal or state income tax, Social Security or Medicare, you’ll need to make a correction as follows:

We’ll assume the check has already been cashed. You’ll void the check in Procare and then repost it so the earnings are correctly treated as being taxable. You won’t actually give them a new check – this is just for calculation purposes. You may need to adjust the taxes on their next check to account for the difference.

To correct the issue:

1. If you have the Expenses & Ledger module, and have already reconciled the check, you’ll need to temporarily unreconcile it using the Edit Register feature.

2. Void the Original Check. You’ll probably want the Void Date to match the original Print Date. See: How Voids Affect Financial Reports

3. Remove the check mark from the “Exclude” box on their Employee Withholdings screen. Or, if the person claims they are exempt from federal or state income tax withholdings, delete that withholding from them entirely, which will still count the earnings as taxable.
   4. Calculate the Paycheck a second time, but do not post it yet.

   1. Go to the Withholdings tab and type over the withholdings with the amounts you actually withheld (if different).
   2. On the Summary tab confirm the Check Amount is the same as before.
   3. Post the check using the original Post Date and Print Date.

4. On their next check, any differences to Social Security should be adjusted automatically (version 10.2.4393 or higher). Manually type over any other withholding amounts (as needed) to make up for under withholding on the original check.

5. You may need to manually adjust your next tax deposit, if the deposit was paid prior to making the correction.

6. If you have the Expenses & Ledger module, and had previously reconciled the check, you’ll need to re-reconcile it using the Edit Register feature.

I accidentally withheld a pre-taxed withholding. How do I fix it?

If you mistakenly withheld an amount from a paycheck and that withholding was marked as tax exempt it affects the taxes deducted from the check and your employer share of taxes for Social Security, Medicare, FUTA and SUTA (if it was marked as exempt from any of those items).

We’ll assume the check has already been cashed. You’ll void the check in Procare then repost it so the amount withheld is no longer treated as tax exempt (steps below). You won’t actually give them a new check – this is just for calculation purposes. Finally, you’ll adjust the taxes on their next check to account for the difference.

To correct the issue:

1. Void the Original Check. You’ll probably want the Void Date to match the original Print Date. See: How Voids Affect Financial Reports

2. Do you need to change the exempt status of the withholding?

   1. If you intended to withhold the money, but the withholding should not have been marked as exempt go to Payroll Formulas and remove the “Is Exempt” check marks as needed.
   2. If the withholding was correctly marked as exempt, but you did not intend to withhold anything from a particular employee then Delete the withholding from their Employee Withholdings screen.

3. Calculate the Paycheck a second time, but do not post it yet.
   1. Go to the Withholdings tab and make a note of the correct amounts that should’ve been withheld for everything.
   2. Then type over the withholdings with the amounts you really withheld.
   Note: If there is no place to put the amount (example: withheld for retirement plan, but person does not participate in the plan) then add it into the Federal Income Tax box. You’ll adjust it on their next check.
   3. On the Summary tab confirm the Check Amount is the same as before.
   4. Post the check using the original Post Date and Print Date.

4. On their next check manually adjust the taxes to make up the difference.

5. You may need to manually adjust your next tax deposit, if the deposit was paid prior to making the correction.