More Critical Details of 2011 Payroll Taxes with Microsoft Dynamics GP

Related to my last piece on the 2011 US payroll tax mess created by last minute changes implemented in the last days of 2010, this alert for Microsoft Dynamics GP customers is simple to understand.  Simple to fix.  But what a mess if you don't get it.

If you rely on the January payroll tax liability calculations in Dynamics GP, you will be incorrect. You must manually calculate the liability until the 2011 Round 2 Payroll Tax Code is available and applied in late January.

Historically, Employer's and Employee's FICA has been exactly the same rate. Dynamics GP used the same percentage field to calculate the tax liability. With the tax amendments passed so late in 2010, Microsoft did not have time to develop and rigorously test new code. The 2011 Round 2 Payroll Tax Code update will fix this, but not in time for payment of January payroll tax liabilities for most companies.

The correct calculation for FICA/Social Security: Gross payroll subject to FICA/SS times (6.2% + 4.2%), which equals 10.4%, not the historical 12.4%.

FICA/Medicare calculation is still correct: Gross payroll subject to FICA/Med times (1.45% + 1.45%) which equals 2.9%

Again, if you rely on Microsoft Dynamics GP federal payroll tax liability calculations for FICA taxes in January, you will under accrue and under pay. 

Here's a question I recently fielded from a GP user on my blog.  The answer is important for everyone to understand:

Question

Hi Gloria,

...

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