When using the Procare W2 / 1099 Software there are two options for Social Security and Medicare as follows:
Automatically Corrected (recommended setting)
“Automatically corrected” means the exact amounts that should have been withheld will be used. This is determined by multiplying each employee’s taxable earnings, for the entire year, by the appropriate rates for Social Security and Medicare. The results are more precise than adding together withholdings from individual checks. Any differences are accounted for by adjusting the Federal Income Tax withholding. Therefore, don’t be concerned if the amounts withheld for Social Security, Medicare, and Federal Income Tax on the W2 vary slightly from the totals on the employee’s last pay stub of the year. Typically, the differences will be a matter of cents, not dollars.
Exactly as Entered
“Exactly as entered” means the amounts withheld on individual paychecks throughout the year will be added together and imported exactly the way they were recorded. This result is likely to be slightly over or under the correct amount for the full year. [Editor’s note: In 2020, If you chose to defer social security payments (to not withhold SS from employee checks) due to Covid-related legislation please ask your tax advisor how to report this information. You may wish to choose “Exactly as Entered” in this situation. See also: How does the 2020 Payroll Tax Cut affect me?]