Over the past two days, we’ve received word of some incorrect federal tax calculations when using the new “Higher Withholding” options from the new Form W-4 in Microsoft Dynamics GP.
If you have not updated any employee records to one of these new options, you will not have experienced an improper calculation on your recent payrolls from this known issue.
The taxes withheld for the “Higher Withholding” options should be taking out more taxes than their equivalent status without the higher withhold option, but instead they are withholding less. This has been confirmed in a message from Microsoft Escalation Engineer Terry Heley.
The error is in the setup of the Payroll Tax Filing Status when a Standard Deduction amount is entered where it shouldn’t be, as this is already accounted for in the new tax tables. Images below show the amounts in this window for each of the “Higher Withholding” statuses.
How to resolve the payroll tax issue
The recommended resolution for this issue is to run the Payroll Tax Update wizard. A reminder that you should only update the payroll tax tables if you have created your final version of your 2019 year-end wage file.
In testing the Payroll Tax Update, new updates were applied, and these amounts were removed as shown above. Please note that the Last Tax Update date was not changed with the release today. Another tax release is targeted for next week to include state updates.
An update was also provided by Microsoft about the state Form W-4 changes. Some states follow the federal Form W-4 format. This does not mean that the tax tables are handling the Form W-4 change the same way. Microsoft stated they are evaluating each state with the tax table they release and how it fits into the Form W-4. If there is a need to add the extra filing status, then it will be added like was done for North Dakota in the round one tax update.
No state as of yet is using the new dependent claim amount in their tax tables, so there is no need to add it to the state window at this time.
These changes highlight the complexity of the updates this year. We recommend to apply this new tax update and review any employees using a “Higher Withholding” status to make sure it is calculating as expected after the update.
If you have any questions about this error or how to resolve it, contact us.