ENTERING AUTOMOBILE FRINGE IN A SEPARATE PAYROLL: EMPLOYEE PAYING TAXES When calculating automobile fringe, you have the option to do so in a payroll cycle separate from your normal payroll. If you choose to calculate it in a separate payroll cycle, you need to decide if the taxes will be withheld from the employee in a future pay cycle, or if the employer will be responsible for the taxes from the automobile fringe. To calculate automobile fringe in a separate payroll cycle with the employee being responsible for the taxes, follow the steps below: Note: If you already have a miscellaneous deduction set up for corrections, you can skip steps 1 and 2. 1. Create a miscellaneous deduction for corrections. From the Main Menu, go to Payroll > Maintenance > Misc. Deductions. a In the Deduction field, enter a name for your deduction. b In the Description field, enter a description for the deduction. c The Short Desc field will fill in automatically. If desired, you can modify this description. d In the G/L Payable account field, select the desired account. Please note that this account will be a wash account. If you are unsure of which accounts you should use, please contact your accountant. e Click [OK] to save the record. Note: Do not put this deduction on an Employee Record. www.foundationsoft.com (800) 246-0800 1
2. Add the miscellaneous deduction to the Payroll Control File. From the Main Menu, go to System > Controls > Payroll > Misc Tab. a In the Adj Misc Deduction No field, select the miscellaneous deduction you created in step 1. b Click [OK] to save the record. 2
3. Define an earn code for the automobile fringe. Note: When setting up your automobile fringe, please contact your CPA, as this set up varies by company and state. From the Main Menu, go to Payroll > Maintenance > Earn Code. a In the Type field, select Non-Monetary Fringe. b Enable the taxation checkboxes as needed. Enabling the checkboxes will make the fringe taxable to the listed authority. Foundation Software, Inc. strongly recommends enabling the FICA, Federal Tax, State Tax, and Local Tax checkboxes. If you are unsure which checkboxes you should enable, please consult your accountant or CPA. c Enable the Withhold on Fringe checkbox for each tax authority as needed. Foundation will withhold taxes for the listed authorities with this checkbox enabled. Foundation Software, Inc. strongly recommends enabling this checkbox for the FICA tax authority at a minimum. If you are unsure which checkboxes you should enable, please consult your accountant or CPA. Note: The enabling of these checkboxes may vary by company. Foundation Software, Inc. strongly recommends you consult your accountant or CPA when choosing to enable or disable any of these checkboxes. d In the G/L Expense field select the account that should be debited with the earnings from this earn code. If you are unsure of which account to select, please consult your accountant or CPA. e In the G/L Fringe Credit field select the account that should be credited with the earnings from this earn code. If you are unsure of which account to select, please consult your accountant or CPA. f Click on the W2 tab. 3
4. Set up the W2 tab. a In the Fringe Reporting field, select Include in W2 Box 14. b In the W2 Box 14 Code, enter AUTO. c Click [OK] to save the record. 5. Enter the adjustment using the Adjustment Genie. From the Main Menu, go to Payroll > Daily > Adjustment Genie. a In the Do You Want To section, select Adjust Prior Payroll History? b In the Gather History Within These Dates fields, enter a date range for an entire year. For example, 1/1/20/XX to 12/31/XX. c In the Select Employees section, select the employee for whom you are entering the automobile fringe adjustment. d In the What Type(s) of Adjustments? section, enable the Earnings and Miscellaneous Deductions checkboxes. e Click [OK]. 4
6. Verify the selected employee. a Verify you selected the correct employee and that the Selected checkbox is enabled. b Click [Next Employee]. The Earnings window will open. 7. Enter the adjustment on the Earnings window. a Right-click and select Add. b In the Earn Type field select the automobile fringe earn code you created in step 3. c In the Amount column in the Should Be field, enter the amount of the automobile fringe. In this example, the automobile fringe is $1,000. d Click [Next >>]. e The Miscellaneous Deductions window opens. You do not have to enter anything on this window at this point. Click [Next >>]. The Federal Taxes window will open. 5
8. Determine the total tax amount withheld for the automobile fringe. Determine the total tax amount that should be withheld for the automobile fringe for each tax authority and enter the amount in the Additional row. State and local tax authorities can be entered by selecting [Next] at the bottom of the window. In this example, the total tax amount is $76.50, as tax was only withheld for FICA. Note: Depending on how the Withhold On Fringe checkboxes are set up on the automobile fringe Earn Code Record, the information on tax windows will vary in the following ways: a If the FICA Withhold On Fringe checkbox is enabled, the Social Security and Medicare columns will automatically update. b If the Federal Tax Withhold On Fringe checkbox is enabled, the Federal Tax Withholding column will not automatically update. If you want to include additional federal tax withholding, you must manually calculate and enter it. c If the State Tax Withhold On Fringe checkbox is enabled, the State Tax Withholding column will not automatically update. If you want to include additional state tax withholding, you must manually calculate and enter it. d If the Local Tax Withhold On Fringe checkbox is enabled, the Local Tax Withholding column will automatically update. Foundation determines the state/local allocation percentages based on the employee s history in each tax authority. Taxable earnings are then applied to each locality based on those percentages, and are automatically taxed at the current rate of the tax authority. e Click [<<Back] to return to the Miscellaneous Deductions window. 6
9. Add the tax amount to the Miscellaneous Deductions window. a In the Should Be row for the correction miscellaneous deduction you added, enter the total amount of tax calculated in step 8 as a negative amount. This will offset the additional withholdings on the Tax windows. In this example, we entered -76.50. b Click [Next >>] until you get to the Review window. 7
10. Review the adjustment. a Verify that the amount for the correction miscellaneous deduction and the additional tax amounts net to zero (0). You can check this by verifying that the Net Amount field in the bottom left corner of the window equals the original automobile fringe amount entered in step 7. b If the amounts do not equal zero, click [<<Back] until you return to the Miscellaneous Deductions window and adjust the correction miscellaneous deduction. If you cannot get the amounts to equal zero, please contact Customer Support. c If the amounts do equal zero, click [Finish]. 11. Compute the adjustment. a After you click [Finish], a message will appear asking if you want to create the adjustment for the employee. Click [Yes]. The Adjustment Prior to Payroll History window will open. 8
b Click [Done]. c You will be prompted to compute payroll. Click [Yes] and the Compute Payroll Criteria tab will open. d Verify that the Payroll Adjustments section is set to Positive. e Verify the History Adjustments Only checkbox is enabled. f Click on the Report tab. 9
12. Post the adjustment. From the Main Menu, go to Payroll > Daily > Post Adjustments. a In the Post Date field, select the appropriate post date. This is usually that last day of the calendar year in which the automobile fringe was accrued. If you are unsure what post date to use, please contact your CPA. b In the Week Ending field, select the same date as the post date. c Verify the Bypass G/L checkbox is disabled. d When you are ready to post, click on the Report tab. Please note that as soon you as you click on the Report tab, the Adjustment Register will display and your adjustment will be posted. Note: Foundation Software Inc. recommends printing or saving the Adjustment Register. 13. Withhold the taxes from the employee s paycheck. After the adjustment is posted, the employee will owe the amount of FICA that was withheld. In this example, the employee owes $76.50. You will have the option to deduct this amount from the employee s next paycheck when you compute payroll. The next time you compute payroll for the employee, a dialog box will appear, indicating the employee owes money. You can choose to deduct the total amount or a partial amount, or you can choose to deduct the amount later. If you choose to deduct a partial amount or deduct later, Foundation will prompt you to deduct any remaining amount the next time payroll is computed for the employee. Select the desired option and click [For This Employee Only]. 10