Reversing retainage not being paid to the vendor is similar to invoicing retainage.  The difference will be in the Invoice Amount field.  The retainage will still be billed as normal, but the same credit amount will be entered in the Invoice Amount field.

The retainage must always be a net result of $0 overall for the contract in order to remove from the Open Items so even though it will not be paid, it must be invoiced and credited out of the retainage field.  Once the retainage is billed, any credits/reversals are handled like a regular invoice credit.   This is done in one simple invoice by entering the retainage amount as a negative in both the Invoice Amount and the Retainage field – therefore netting out to a $0 amount due.  The amount to distribute will be the credit amount in the Invoice Amount field.  For example, if there is $600 left in unbilled retainage, the invoice will be  ($600.00) in the Invoice Amount field and ($600.00) in the Retainage field.  This results in a $0 net due.  Distribute the ($600.00) in the distribution line.

Once the retainage is billed, the reversing invoice is treated as a regular credit invoice.  The retainage field is not used in the reversal as the total retainage is already $0.
Create an invoice called VRetainage – or a similar invoice # that will be descriptive.  The invoice amount will be the amount of the l retainage invoice not being paid as a negative.  Nothing should be entered in the retainage field.  This will display a negative net.  Distribute the negative amount to the job and pay both the original and the credit invoice with a $0 check.

If a check has already been printed for the original invoice, you will not need to pay the original invoice and will use the original check number in the reversal invoice.

The void check routine is used only when the invoice will be paid again as entered.  The void routine simply reverses the check written and opens the invoice up to be paid at a later date.  The void date should always fall into the current month in which you are working, even if the original check date is from a prior month.  If a date prior to the current month is used, the void will not be part of the monthly transfer and the cash and AP accounts in General Ledger will not reflect the void.
If the check paid more than one invoice, the void will reverse the check for each invoice paid.

The voided checks will show as VOID on the check register.

If you have an invoice that is not paid and it needs to be taken off the system completely, you may just delete the invoice.  The system will delete the invoice from Power Tools.    The deleted invoice will not show on any other AP reports.  Invoices cannot be deleted if a payment exists or if the month is locked.   If an audit trail is required, a credit invoice can be entered for the amount of the original invoice.   If possible, use the original invoice # with a V at the end so they will display in order when printing reports – making it easier to reference to the original.

Paid Invoice

To reverse a paid invoice from Accounts Payable (whether it’s posted to GL or not), enter a negative invoice for the same amount as the original and distribute to the same account as originally charged.  Pay this invoice with the same check number as the original invoice.  Stay within the current month you are working in for the month end date.  You may reference the original invoice by using the original invoice number with a V after.

Unpaid Invoice

To reverse a transferred unpaid invoice from Accounts Payable, you must take the same steps as above.  Enter a negative invoice, distributing the invoice to the same account as the original invoice.  To drop both invoices from the Open Items report, both invoices must be paid.  You may do this by entering a check number 999999 for both the positive and negative invoices.

Power Tools pays the amount displayed in the Amount To Pay field of the invoice.  If a partial payment is required, change that field to match the amount of the payment you will be making.  This is done in the Check Processing Screen.  Simply change the Amount To Pay to the dollar amount required.  Once the invoice is paid, the new Amount To Pay will be the difference between the invoice amount and the previous payments.

Complete the tie out sheet in End of Month Processing to be sure all is in balance before transferring.
Also – print the audit reports on the main AP Screen to determine any possible duplicate invoices and/or out of balance distributions.

On the End of Month menu, select the Disbursement Report for a specific vendor or All Vendors.  This report will list all checks within the date selected with the corresponding invoices and dollar amounts.
Browse Checks by Date or Browse Checks by Vendor on the Enter/Browse screen in AP will also display all invoices paid with a check.

This comes in handy when a single invoice involves multiple types of cost. For example, an expense check. Tolls, lodging, small tools, etc. This eliminates the need to enter multiple invoices for one actual invoice simply to code to the correct class and code.

From the System Control Menu, Select the PT Account Setup option, then the Transaction Classes
Select a class at the top of the screen.  Then at the bottom, select all the types that should be available for distribution.  For example Other. Select the class OT at the top. The bottom portion shows what types are available when the OT class is selected.

Go to the next line and select the Type. This will automatically put the Type description in the Type/Short field. Set up the Default Class for the additional classes selected. This is how it should look when the OT class is also set to allow entry to Materials, and Equipment.

Create an unlimited  number of terms codes to cover the needs of each vendor.  When replacing existing, be sure that each vendor has a valid terms code in the event any existing are deleted.

The terms are explained below:
#1 – The terms code. 3 digit field and can be anything – letters, numbers, symbols
#2 – The days due from the invoice date.   The system will add the amount of days added here to the invoice date to determine the due date.
#3 – Discount Days – if there is a discount offered, enter the amount of days to calculate to discount.   (the system will still allow the discount if you go over the days)
#4 – Discount Percent – if a discount offered, enter the percentage
#5 – Description of the terms code

To use the Find/Replace to update the existing term codes, select the Vendor file, then move over to the right to find the Terms Code field
#1 – Click the mouse in the Terms field, Hold the Control key and hit H.  This will bring up a Find and Replace box
#2 – Enter the terms code you want to replace
#3 – Enter the new terms code
#4 – Select the Replace All to replace the information.

Set up a GL Liability Account for sales tax payable – for example  GL account  20550
Entering the invoice – for an example, we’ll use a $100.00 invoice with a use tax of 7%  for  concrete (cost code 03300) on job 52020.
When entering the invoice, the invoice amount will be the actual dollar amount of the invoice  $100.00.
When you get to the distribution portion, distribute the invoice amount PLUS the tax % to the job – in this case, it is $107.00 to    job  52020    cost  code  03300.
Then distribute the tax amount as a credit to the liability account   ($7.00)  to 20550.
When posted, the following will happen

52020   03300       $107.00
AP Account         ($100.00)
20550 - Tax Acct     ($7.00)
                      $0.00

At the end of the month, run a GL detail report on account 20550 and it will list all the vendors and dollar amounts for taxes owed.

The vendor tracker provides the ability to set up user-defined items for tracking.   Examples are business and contractors licenses.    Due dates determine when the items are required.  Past due and items due within 30 days are displayed on the main AP screen.
Items to track are entered in the Tracker References at the top of the entry screen. 

Select the Log Entry Type to enter each type of item to track.    An example is Business License and Contractors License.   To include more types for the drop-down selection, simply enter the Sort Order (the order in which they will display in the drop-down) and the description of the type.   DO NOT DELETE LOG ENTRY TYPE AS IT IS THE VALUE USED TO CREATE ALL OTHER ENTRY TYPES

Once the types are entered, select the Type on the left to add the drop-down selections for the tracking type. (for the Business License example, it could be different state licenses, counties, or cities.   Contractor Licenses may include different construction industries)
The items on the right are the selections that will display in the drop-down menu when the tracking type is selected.  

To use the tracker, enter the Vendor, Entry Date, and Next Date (due date).
Select the Type (these are the items entered when the Log Entry Type was selected in the setup)
Once the Type is Selected (Contractors License for example), select the item description to further detail the type.

The data may then be sorted, filtered, and displayed as needed.  The tracker will display the Past Due until the Date Done is entered.

The Copy Invoice option allows the user to select an existing invoice and copy the info to a new invoice.
To begin, select the invoice, then View/Edit Invoice option at the top of the screen.
The Copy Invoice option is located at the top of the screen.

When the Copy Invoice option is selected, a box will appear displaying existing info and provides the New Invoice info.  Enter the new Invoice #, month end date, and invoice date.
Save & View to display the invoice for editing. Make any changes to dollar amounts and distributions before closing.

The Changed Locked Fields option allows the user to change the normally un-editable portions of the invoice.
This includes the Control, Class, Vendor, and Order #.   These fields (along with the invoice #) determine the invoice is unique and not a duplicate.
However, there are times the invoice may be entered to the incorrect job, vendor, or perhaps as a miscellaneous invoice when it should have been applied to a PO or Subcontract.
The Change Locked Fields allows the user to change everything with the exception of the Invoice #.   If the invoice # is incorrect, it must be deleted and re-entered.
To begin, select the invoice and the View/Edit Invoice option.

Select the Change Locked Fields option at the top.  This will open an edit box to allow the Control, Class, Vendor, and/or Order # to be changed.   Hit Save & Close to continue.    Undo Changes will cancel the change.

If the invoice data changed will affect the distribution to the job (for example, the class was changed from an MI to an SC type invoice), the distribution lines will be cleared for re-entry.  Another example is a Control/Job change.  This will change the distribution of the invoice.   Re-enter the new job/code for the invoice and select Close.
Changing the vendor does not affect where the invoice was charged so the distribution lines will not be cleared if the Vendor is the only option changed.

If the invoice has been posted to GL & Job Cost, the user will be prompted to re-transfer in order to update both the GL and Job Cost with the changes.

Invoice payments processed as ACH payments upload directly from the bank to the vendor without printing/sending a physical check.   Similar to a direct deposit in payroll.   An ACH Vendor Form is attached and can be sent to the vendor.  The form includes all pertinent information needed from a vendor to process an ACH payment.

The process begins by determining what users have access to the ACH process.   This is done by marking the ACH options in the User Security in Accounting.
In the System Control menu of Accounting, add the bank information making sure to check the ACH Account for AP box.   The Bank URL for ACH Submission allows the user to add the website address for the bank to take you directly to their website for upload.

The vendors accepting ACH payments will need to have routing and bank account information added to their vendor file as well as a name and email address for the notification.

The Generate Prenote option in the Bank file allows the user to send a $0 test file to the bank for verification of account and routing numbers for each ACH vendor.

The Check Processing screen includes an additional option for payment.  ACH Electronic payment button is at the top of the screen and will be affective for any records check for ACH.   The items checked are those with the ACH button checked in the vendor screen but can be unchecked to print a paper check at any time.

Check the Pay Now  button to select the invoices for electronic payment.    Enter a voucher # and effective date.

An ACH Pay Review report will display showing the invoices and totals for each vendor selected for ACH payments.

When confirmed, the payments will be applied to the invoices displayed and the ACH file created in the folder selected for upload to the bank.

In addition, an email will be sent (to the notification email in the vendor file) detailing the invoices paid and the expected date of payment.

Check to be sure the customer and job are linked.
Check to be sure the month is not locked in AR
Making sure to be in the pay request month, select the Create Invoices from Pay Request option to create the invoice.

Retainage is billed by entering a new invoice with a $0 invoice amount and the retainage as a credit.  For example, $45,000 of retainage is being released to bill.    The invoice amount will be $0.00, the retainage amount will be entered as ($45,000.00). This will result in a positive amount to pay and clears the retainage field to $0.

To clear an open invoice, enter a new invoice (current month) as a negative amount.  The credit invoice amount will be charged to the Bad Debt account in lieu of the revenue account.

Then pay both the original and the credit invoice with a $0 receipt to remove from Aging and Open Items.

During processing the Contract will be adjusted to match the Total Billed (if different). The Proj Fee is adjusted so the Cost-To-Date plus the Proj Fee equals the Total Billed. The amounts are automatically adjusted when additional cost or revenue is recorded for a completed job.

When you save the WIP each month, a snapshot of the WIP is saved for that month end date. The saved data is used for the Contract Schedules and WIP reports and can be recalled at any time for reporting purposes.

The WIP automatically updates contracts and approved change orders from JCPM. This is done each time the WIP – Enter Fees and Post option is opened. Although the contract amount can be edited directly in the WIP screen, it will be overwritten each time the WIP process is done. Permanent changes to the contract amount should be done through Change Orders in JCPM.

A difference in the WIP contract amount may also be a change order approval date not within the WIP month. If this is incorrect, simply change the approval date on the Change Order and re-run the WIP process.

An additional possibility may be that the job was marked Completed. A Completed job will match the contact with the Total Billed Amount.

The WIP Projected Fee is normally updated by the user each time the WIP is run.  This fee is an overall projection of the profit on the job.  This fee should stay as entered unless the following has occurred:

The job is marked Completed but the Cost to Date + Fee does not match the Contract Amount.

Or – the WIP has been saved for this time period.  When opening the WIP for the month, it will recall any saved information for that date.   If subsequent WIP months have been saved and will need to be re-run, select the Delete Future WIP option at the top of the screen.  This will allow the WIP to use the previous month’s Fee as a starting point instead of recalling prior saved information.

The Work In Process Reports include a Total Earnings, Prior Year Earnings, and Current Year Earnings column.  In order to include this information on the Contract Schedule, prior year information must be entered for the jobs brought forward.   The current month fields are calculated by simply subtracting the current year to date total from the year end total.

This is done in the GL End of Year menu, Enter Prior Year WIP and Project % Complete option.   Select the  Plug Amounts from Prior WIP option at the top of the screen to update the information.
The information includes the Earned Revenue (Total Revenue) through the last fiscal year, the Estimated Profit (Projected Fee), and Profit Accrued (Total Earnings/Loss.

The 401k deduction may be set up as a dollar amount or percentage per pay period.

The employer may elect to match a percentage of the deduction.   The PR system includes a 401k Match Report to determine the matching dollar amount per employee.  The employer match detail is set up in the System Control (option 10) on the Payroll Enter/Browse screen.  Details are below:

System Control File

401K Pct Match  Enter the employer matching percentage (for example, the company is matching up to 50%)
401K Match Limit:  Enter the compensation percentage limit for the employer matching (in example – 50% of 5% of employee’s compensation which is $1,250.00 for an employee earning $50,000/yr)
401K Maximum Match:  Enter the dollar amount limit for employer matching.  This is an overall cap on the employer %  match.
401k Employer Match/Limit Example:   Using the numbers in the above example……an employee withholds 20% of their  compensation for 401k.    The employer will match 50%  up to 5% of  the employee’s yearly compensation with a cap of $6,000.00 total. 

The example looks like this:
Employee makes $50,000.00/yr in compensation        20% is withheld for 401k =  $10,000.00
Employer Match Limit 5% of employee’s yearly compensation = $2,500
Actual Employer Match is $1,250 as they match 50% of the 5% of the employee’s yearly compensation.

Note:  401K deductions are not subject to Federal Withholding but are subject to FICA Withholding.

Start Week End:  Enter the Week Ending Date of the payroll period for when this deduction should start being withheld.

Ded Type:  Normally set as a Type 2 – Hit Limit and Stop.  This allows the employee to contribute the maximum amount without having to remove the deduction when the limit is reached.
Ded Amt:  If the Employee chose to have a fixed amount deduction each pay period, enter the amount here.  If the employee chose a percentage, leave this blank.   The Percentage is added in the 3^rd column of the employee file.
Ded Limit:  Set the deduction limit for the year for the employee.  The amount that is exempt from withholding generally changes each year.  And, generally has a higher ‘catch-up’ amount for people age 50 and older.
Ded Accum’d: This field is updated by the Payroll program and represents the amount withheld to date.  When the Accumulated Deduction is equal to the Deduction Limit, the deduction will stop.
GL Acct / GL Subsid / GL Div:  Defaults to the deduction account set up in System Control.  If account subsidiaries will be used to detail account by employee, enter the subsidiary.
Vendor:  Leave blank if the 401k vendor is the same for all employees.   The vendor entered in System Control will be the default.  Utilize this field to overwrite the System Control vendor.

Several choices exist to transfer a percentage of labor costs each pay period.
Actual Overhead
A Percentage
A Combination of actual and percentage.

The recommended method is a percentage of labor costs each pay period.  This allows more consistency for budgeting and projections  as amounts won’t fluctuate as they will with actual.  Examples of fluctuating amounts during the year include FICA, FUTA, and SUTA due to annual limits.  The overhead costs will be much higher at the beginning of the year using the Actual Overhead method.

A combination of the  two methods is suitable to record actual workers’ comp and actual FICA Expense, but a percentage of labor to accumulate unemployment and fringes.  Actual and Percentage methods are outlined separately below.

The overhead may be coded to the same code as the payroll or to a single code.

Percentage Overhead

Job / Control File:

Charge Pct OH:  Check this box to charge a percentage of overhead to the job/account.  This is a percentage of all payroll cost – including Other Incomes not related to actual hours worked.  ie.  truck allowance, perdiem, etc.
Pct/Limit:  Enter the percent to be used when calculating the overhead cost.
Account Debit:  Enter the job to be charged with overhead.  This should be the same number as the job/control number at the top of the screen.  The  code used for the overhead charge may be a single code – entered here.  To charge overhead to the code matching employee’s time, enter  99999-9999.
Account Credit:  Enter the credit offset GL Account.  This can be a labor related overhead in the expenses or an accrual account (SUTA and FUTA)
Trans Class:  Enter the class code to be used for the overhead cost.  The default class is PR, but a user-defined class may be used instead, such OH for overhead, or BU for Burden.  Please note that any user-defined class code must be entered as an additional cost item in the job budget.
(S)ummary, (D)etail, or (L)abor Class:  This entry determines how information will transfer from Payroll to General Ledger and Job Cost.  Entering ‘S’ will transfer the information in a summarized job/cost-code format to Job Cost.  This is the recommended method.  Entering ‘D’ will transfer  the information in detail, by employee, making it easy to determine an employee’s hourly rate when reviewing Job Cost reports.  Entering ‘L’  will use the burden rate entered in the Labor Class file for calculating the overhead charge, and update the information to Job Cost summarized by Labor Class.
 

Actual Overhead

1. Since calculations will be based on actual tax rates and worker comp rates, verify all limits and percentages are entered in System Control, Labor Class, and State, County, City files.
2. System Control Company File, Screen 1, determine if you want the State Unemployment to be transferred as actual cost up to the State Unemployment limit (entered in the State/County/City). In the field OH State Unemploy, enter a “C” if you want actual unemployment to be calculated on the Company’s State Unemployment Limit, or “R” if you want the actual unemployment to be calculated on the Resident State of the employee.
3. In the Job / Control file, select the overhead items to transfer as actual costs.  These include FICA, FUTA, SUTA, Worker Comp, Union Fringe, Lump Sum Amount by Employee, Percentage of Earnings, a Percentage up to a Limit, and/or an Hourly Rate up to a Limit.
   Enter the account number/job number–costcode to debited and credited with this activity.  As with the percent overhead, a 99999-9999 distribution will automatically transfer the actual overhead for this item with the same code used to distribute the hours worked.
4. The GL  account number used as the credit is usually referred to as “Applied Wage Related Overhead”.
   The Transaction Class on this screen can be very useful in breaking out your job cost reports between labor and burden.  By using a separate Class Code for Overhead/Burden, your cost reports will report separate totals for Labor and Burden, even if the actual overhead is distributed with the hours worked.

The first step is to add the labor burden percentages to the Labor Class file found on the PR Enter/Browse screen.

Check the Charge Pct OH line but do not add a percent amount.   Also be sure the transfer type is set to L (labor class)

Once this is set, the payroll transfer will include a line item per labor class for the percentages set in the labor class.  For example, the Carpenter labor class is 100 and has a labor percent overhead of 45%.   The labor on the job was $1,486.00.   The 45% labor burden in $1,486.00 is $668.70.

PR Error Conditions

Below is a sample of items that may display on the Payroll Error Conditions Report and possible solutions.

Employee is missing Fed Status for M or S
Correct by selecting the appropriate Federal Marital Status in the Employee File (Enter/Browse).

Employee is missing State Marital Status
Correct by selecting the appropriate State Marital Status in the Employee File (Enter/Browse).

Distribution Job <job/acct> is not in Job Control Table
The Job or Account where time has been coded to is not in the Job/Control File.
Either the wrong Job/Account was used in coding, or is missing from the Job file.

401K Does Not Have Limit Amount
The 401K deduction is set as a Type 2 (Hit Limit & Stop) but the deduction limit in the Employee File has not been entered.
This may be corrected through Employee Miscellaneous Deductions (Enter/Browse).

Invalid Auto Dist Account
An Employee set up on an auto pay cycle has an invalid account set for distribution.
The Auto Pay Distribution Account, Subsidiary and Division is located in the Employee File (Enter/Browse).
The auto pay entry will not be created for employees with an invalid code.

Auto Credit or Auto Job/Account for OH <job/acct> is 00000
This Job/Account has been checked to calculate and generate an Overhead Charge.
The account to receive the credit amount of the overhead charge was not entered or is zeros.
Enter a valid account/subsidiary/division in the Job / Control File (in the Enter/Browse tab) for the Auto Overhead Credit Account.
If Payroll has already been transferred, update the data by re-transferring the week.

401K Deduction cannot be marked for Section 125
Either the correct 401K deduction has also been checked as Section 125, or the incorrect deduction number has been entered on Screen 1 as the 401K Deduct #.
Uncheck the S125 box or enter the correct deduction number on Screen 1.
If this error has appeared for more than one pay cycle without being corrected, please contact Power Tools Support for assistance in correcting previously processed data.
As 401K deductions are excluded from Federal withholding, and Section 125 deductions are excluded from both Federal and FICA withholding, corrections may be needed for prior weeks.

Labor Class Code not Valid for State <state number>
The Labor Class entered for this employee is blank or incorrect.
Labor Classes are defined in the Labor Class File (Enter/Browse).
If the wrong Labor Class was entered in the Employee File or left blank, correct it in both the Employee File (Enter/Browse), and on the employee’s time distribution in Input Time.
Correcting the Labor Class in the Employee File will not automatically correct the Labor Class for time already entered.

Total Amt. in Hours not equal to Gross Pay Chk # <check>
The amount of the gross pay does not equal the employee hours x the employee pay rate.
The may occur when additional time is entered after Process & Pay is completed.
To correct select the Process & Pay option, delete the employee’s check, select the Refresh button, and reprint the check.

Hours Without a Processed Pay Record
Hours have been entered without creating a voucher or check.
This error displays before checks/vouchers written or when additional time is added after checks/vouchers written.
Select Process and Pay to print an additional check/voucher  for the added time.

Variance in Net of <amount>
This error will appear if an employee’s Gross pay, minus deductions and withholding, does not equal the net amount.
The most likely cause is an adjustment made to a Miscellaneous Deduction in the Employee File after Process & Pay has been run.
This can normally be corrected by selecting the option ‘Remove All Deducts From zero chk#s for Re-Process’, and then selecting the Process & Pay option again.

Invalid Division <division>
If the incorrect division was used for time distribution, return to Input Time (Current Week) and select the correct division for this employee.

The cash/bank account defaults to the last used when printing checks and/or vouchers in payroll.   The bank can be changed during the check print process by simply selecting a different bank account.  (See 2^nd screen shot).
If the bank is new and does not exist in the drop-down, the bank will need to be added in the Accounting System Control menu.
Adding a bank includes 2 steps:

Add the GL Chart of Account # for the Bank
Select the >* button at the bottom to move to a New Record and enter the new GL Account #, description, and Major Grouping Code.

Add the Cash Account
Required fields for the basic bank setup are the bank name, Company #, GL Cash Acct #, and Account Type.
The GL Cash Account should be the GL Account #.
Enter additional information as needed – direct deposit will require bank information including account,  routing and ABA number.
Be sure to include the Direct Deposit Information if the direct deposit is used in payroll processing and ACH for payable processing.

The first step to direct deposit processing is to contact the bank to process the proper paperwork associated with direct deposit.
***Be sure to ask the bank how many days are required to process the direct deposit to the employee accounts.   It’s normally 2-3 days before the actual pay date***
The steps required in Payroll are to set up the bank information, set up the employee account information, and finally, send a Prenote (example) file to the bank for verification of accounts and employee information before the first live direct deposit.

Set up Direct Deposit Information in the Bank Account
Add the Bank Account #, ABA Number, and Direct Deposit Info at the bottom. Be sure to check with the bank for the proper Deposit Name, ID, and routing number.

Employee File Setup
Enter the routing #, bank account #, and account type for the main direct deposit account.
A second direct deposit account can be set up to transfer a set dollar amount.  This will be deducted from the total amount sent to the main direct deposit account.
In order for the direct deposit to begin, the Direct Deposit box must be checked.

Processing Direct Deposit Payroll/Prenote to Bank
Employees choosing direct deposits will receive a voucher in lieu of an actual check.   The vouchers and checks must be printed separately – and are normally on different forms.
Once the vouchers are printed and saved, the NACHA extract can be done and the file sent to the bank.

The direct deposit pay date should be the date on the vouchers.  This is normally the default pay date for the payroll, but if a different date was used (holiday, bonus, etc.) be sure to change the date to the date on the vouchers.
***Create Prenote allows the user to send a test file to the bank.  This file will have $0 for each employee but serves to assure the deposit accounts are correct for each employee before sending a live payroll through direct deposit***
Select Export to create the file.  The file is created and sent to a pre-determined location. When uploading to the bank, the file will be located in the path displayed.

A report is also created to allow the user to double check totals and account numbers.  The NACHA file can be created as many times as needed until the file is correct.  Note the all 0’s bank account number for the first two employees.   This can be corrected in the employee file and the NACHA extract re-run.  The file will be replaced with the most current.

QUESTION:  Handling 3^rd Party Sick Pay

ANSWER:  The following instructions apply when the third-party transfers liability for reporting to the employer and the employee is covered for social security and medicare.   The third party must make deposits of withheld employee social security and medicare using its own name and EIN.  The EMPLOYER must make deposits of the employer portion of social security and medicare taxes using its name and EIN.   In applying the deposit rules, the employer liability for these taxes begins when the third party’s notice of sick pay payments is received. This process allows the user to show the income from the 3^rd party,  report the taxes properly on the 941 and W-2 and pay the proper employer portion only tax liability. 

Entering the payroll

• Set up a deduction for 3^rd Party FICA
• Set up a deduction for 3^rd Party Pay
• When entering the payroll, enter the gross amount of pay.
• In Process and Pay, zero out the Federal Withholding amount
• Enter the Gross amount in 3^rd Party Pay deduction field
• Enter the total amount of FICA as a credit in the 3^rd Party FICA deduction field

Total check should be a $0 amount.

When paying the taxes for the week, subtract the 3^rd Party FICA from the Total Federal Deposit to determine the amount of Fed Deposit to pay.

Submitting the 941Report

• Line 2 should include the total amount of sick pay the third party paid the employee
• Line 5a should include the total amount of sick pay the third party paid the employee subject to Social Security
• Line 5c should include the total amount of sick pay the third party paid the employee subject to Medicare
• Line 8 should include total amount of sick pay adjustment

The Prevailing Rates are set up on the Enter Time screen.  The Certified Rates button allows the user to enter prevailing rates per job/per labor class.   The job must be marked as a Certified job in order to set up the classes/rates.

The first time the Certified Rates are used, the Labor Class and Description must be entered. (it won’t display in the drop-down)  However, once entered, the labor classes will display in the drop-down menu for all jobs.   The description and rate may be changed for each job.   This is for input purposes only.  The labor class description will default to the labor class description on reports.

When entering time for a prevailing wage job, the prevailing rate will display and be highlighted in red if the rate varies from the employee’s default rate.

Several things can result in an incorrect federal withholding for an employee.   The first is an outdated tax table.
Be sure to check the Tax Calc date to the left of the main payroll menu.   It should be a current date.   Select the Update Calc File option to ensure the most current file is in use.

The Pay Frequency.    The pay frequency determines how the wages are taxed.   For example,  if a Weekly employee making $800.00/week  is set to Bi-Weekly, the wages for the pay period will be taxed as if the employee makes $800.00 every two weeks – resulting in a lower tax bracket.    The pay frequency is displayed during entry for quick reference.

Federal (and state) exemptions.   Marital status and the amount of exemptions will affect federal withholding percentages.    Married and multiple exemptions will result in a lower federal tax withholding.  Single and 0 results in the highest withholding percent.

Check to make sure any Additional Federal or State Withholding is valid.  This can be a positive or negative amount to increase or decrease the withholding amount.