Year-End Review

Year-End Review

Topics Covered:

HOW TO CALCULATE W-2s
W-2 PROBLEMS AND SOLUTIONS
”941” QUARTERLY FEDERAL TAX WORKSHEET
UNEMPLOYMENT TAX WORKSHEET CALCULATION
PROCESSING 1099 INFORMATION

HOW TO CALCULATE W-2s:

The W2 Calculation dialog box is used to calculate W-2s for current or prior years.
W-2s can be calculated for any year that has corresponding employee history.
The calendar year is specified and the Social Security Wage Limit then defaults from the FED2 deduction for that calendar year.
Enter the PayGroup ID that you wish to calculate and the Employee Grid will populate based on the members of that pay group.
Use the Protect Edited W2 Information checkbox to prevent overwriting edited W2 records. Use the Selected checkbox in the Employee Grid to specify which employee(s) to calculate.
Once an employee has been calculated, a W-2 can be printed.
There is not an option to clear the W-2 calculation.

Miscellaneous notes regarding W-2 calculation:

W-2s can be calculated before or after Year-End Close as long as history is being retained for the year you wish to calculate. Urge customer to go ahead and calculate W-2s before the year is over to test the numbers. W-2s can be re-calculated after the last check of the year.
W-2s can be recalculated as many times as needed to correct.
Inactive employees who have earnings and deductions for the W-2 year can be calculated and printed.
The W-2 Calculation process creates records in the W2FEDERAL and W2STATELOCAL tables. Since Microsoft Dynamics SL does not have a clear W-2 calculation process, the data in the tables can be deleted using Query Analyzer.
If an Earnings Type or Deduction amount is to be printed in a specific box on the W-2s, use the W-2 Control tab found in the Earnings Type Maintenance or Deduction Maintenance dialog boxes to indicate the box number and/or letter. Regular Earnings, Federal, State, and Local Deductions do not need to be assigned to a box number. Remember that if the calendar year has been closed, you must use the Deduction History Screen to access and modify the record for the 2005 deduction to affect 2005 W2 presentation.
For a state or local deduction, the appropriate State ID must be specified in the W-2 Control tab in the Deduction Maintenance dialog box. The State ID will trigger a W-2 to be printed. In order for the local deduction to print on the same W-2 as the state deduction, the local deduction must use the same State ID specification. Remember that if the calendar year has been closed, you must use the Deduction History Screen to access and modify the record for the 2005 deduction to affect 2005 W2 presentation.

FICA wages and deduction amounts:

Box 3 is to report Social Security Wages (FED2).
Box 5 is to report Medicare Wages and Tips (FED6).
Since both of these are FICA type deductions, the deduction defined for FICA Medicare (FED6) must be set to print in Box 6 on the W-2’s. If the box is not indicated, Box 3 will have double the amount of wages (both the Medicare (FED6) portion and the Social Security (FED2) portion will be included) and Box 5 will have 0.00 wages. In order for the Medicare portion to print in Box 6, use the W-2 Control tab in the Deduction Maintenance dialog box (or Deduction History) to set the box number to 6.
All Regular Earnings Types wages will be reported in Box 1, Federal Wages, and Tips on the W-2. If there is an earnings type that is not to be included in Box 1, change the Earnings Type to a Non-Wage type in the Earnings Type Maintenance dialog box, and verify that no federal deductions are attached.
Non-Wage earnings types will be included in Box 1 if a Federal Income Tax Withholding deduction (typically FED1 or FED5) is attached to that earnings type.
The Employee W-2 History dialog box can be used to modify the W-2 information. If the W-2 is modified and the W-2 calculation is re-run without the “Protect Edited W-2 Information” box checked, then all previous changes will be overwritten. If the W-2 has been modified the box “Protect Edited W-2 Information” should be checked so that these changes are not overwritten.
In order for a deduction, such as a 401K plan to reduce the box 1 (Federal) wages, the deduction must appear in the Exemption/Credit tab of the Deduction Maintenance dialog box for the Federal Income tax deduction id (FED1).
Federal Income Tax Withholding (FED1) is automatically recalculated during the W2 calculation to show all regular wages less exempt deductions (from the exemption/credit tab of deduction maintenance) in box 1 of the W2 regardless of how it was set up during the year. Other boxes use the subject wages of the associated deductions (FICA, State and Local).

W-2 PROBLEMS AND SOLUTIONS

A. FEDERAL WAGES DO NOT PRINT ON THE W-2’S:

Verify that the federal wages expected to print on the W-2 all have type = Regular Earnings or Reported Tips in the Earnings Type Maintenance dialog box. Any other wage types will not print with the Federal Wages unless they have Federal deductions attached to the Earnings Type.

B. STATE WAGE PRINTING ISSUES ON THE W-2:

State wages appear in box 16 based on the Deduction Type = State and the two-letter state code on the W-2 Control tab of Deduction Maintenance. The box is populated with the YTD Subject Wages for this deduction id from Employee History (Earnded table). If the amount is incorrect due to faulty setup during the year, the W-2 calculation process does not correct for this.

Correction options include:

Obtain a script from technical support to set state wages = federal wages if that is the case. See KB 848521 for the script and other causes of incorrect state wages.
Initialize YTD Subject Wages in Employee History and re-run the W-2 Calculation.
Initialize State Wages in Employee W-2 History and do not re-run the W-2 Calculation.
NOTE: Use the “Omit Reported Earnings” checkbox to have multiple states deductions in the same state without the wages doubling. Checking this box and re-running the W-2 calculation process will correct this issue.

C. LOCAL WAGE PRINTING ISSUES ON THE W-2:

Local wages appear in box 18 based on the Deduction Type = Local and the two-letter state code on the W-2 Control tab of Deduction Maintenance. The box is populated with the YTD Earnings Subject to Deduction for this deduction id from Employee History (Earnded table). The two-letter state code on the W-2 Control tab of Deduction Maintenance is matched up to the two-letter state code on Work Location Maintenance to determine whether or not to print on the W-2 (see checkbox on Work Location Maintenance dialog box). If the checkbox is not checked – neither the STATE nor the LOCAL amounts will be calculated for the W2 presentation.

D. BOX 3, 4, 5 AND 6 ARE INCORRECT:

FICA wages appear in boxes 3 and 5 based on the Deduction Type = FICA and the Box 06 designation for FED6 on the W2 Control tab of Deduction Maintenance. Boxes 3 and 5 are populated with the YTD Earnings Subject to Deduction for deductions FED2 and FED6 (respectively) from Employee History (Earnded table). Boxes 4 and 6 are populated with the YTD Deductions for deductions FED2 and FED6 (respectively) from Employee History (Earnded table).

If the wages are doubled in box 3 and do not appear at all in box 5, this is a sure sign that FED6 does not have Box 06 identified on the W-2 Control tab of Deduction Maintenance.

E. FEDERAL TAXES ARE INCORRECT:

Federal income tax withheld is populated with the YTD Deductions for deductions with type = FEDERAL (in Deduction Maintenance) from Employee History (Earnded table). If multiple deductions have type = FEDERAL, the system adds them together (typically FED1 plus FED5, but could include others).

F. STATE TAXES ARE INCORRECT:

State income tax withheld is populated with the YTD Deductions for deductions with type = STATE and the same two-letter state code (in Deduction Maintenance) from Employee History (Earnded table). If multiple deductions have type = STATE and the same two-letter state code, the system adds them together.

G. LOCAL TAXES ARE INCORRECT:

Local income tax is populated with the YTD Deductions for deductions with type = LOCAL (in Deduction Maintenance) from Employee History (Earnded table). If two deductions have type = LOCAL and the same two-letter state code, they will be printed on separate lines on the same page. Boxes 15 through 20 allow for two rows of data. If the two-letter state code of the local deductions is different, the W-2 will print multiples on a new page.

”941” QUARTERLY FEDERAL TAX WORKSHEET:

NOTE: This is a worksheet to be used in filing the actual tax return. Microsoft Dynamics SL does not populate all necessary boxes on the return and cannot print a return for filing purposes as manual adjustments may be necessary.

To calculate the 941 worksheet, go into the 941 Quarterly Federal Tax Worksheet dialog box.

The following information will default in:

Employer Social Security Percent: comes from the FED3 percentage rate in the Deduction Maintenance dialog box.

Employee Social Security Percent: comes from the FED2 percentage rate in the Deduction Maintenance dialog box.

Social Security Wage Limit: comes from the FED2 Maximum YTD subject Base in the Deduction Maintenance dialog box.

Employer Medicare Percent: comes from the FED7 percentage rate in the Deduction Maintenance dialog box. (Note that this will be incorrect if FED6 is not assigned to Box 6.)

Employee Medicare Percent: comes from the FED6 percentage rate in the Deduction Maintenance dialog box. (Note that this will be incorrect if FED6 is not assigned to Box 6.)

Medicare Wage Limit: comes from the FED6 Maximum YTD subject Base in the Deduction Maintenance dialog box.

Report for Quarter/Year: the quarter and year that the report is being generated. The Report Quarter defaults from the business dates calendar quarter. The Report Year defaults in from the PrSetup dialog box from the Current Cal Yr field.

NOTE: This process populates the WRK941S and WRK941R tables.

“941” Report Lines:

Line 1: number of the employees with earnings for the quarter.
Line 2: sum of all Regular Type Earnings Types less any pension type exemptions set up for the Federal Type deductions. This is calculated and not just pulled from the Employee History dialog box. If a non-wage earnings type has a federal tax attached to it then it will also be included.
Line 3: sum of the Federal Income Tax (FED1) withheld for checks that have a date within the quarter. This is pulled from the Employee History dialog box and is the sum of all employees in the Deductions Qtr X field of the Earnded table.
Line 5a: total of earnings types for the quarter attached to the FED2 (FICA SS) deduction times 12.4% (both employee and employer shares).
Line 5b: total of earnings type for the quarter with type = Reported Tips times 12.4% (both employee and employer shares).
Line 5c: total of earnings types (both Regular and Reported Tips) for the quarter attached to FED6 (FICA MED) deduction times 2.9% (both employee and employer shares).
Line 5d: total of FICA taxes for the quarter (lines 5a, 5b and 5c).
Line 7e: See bug 9385 – this should print an underline indicating that the user must fill it in.
Line 9: Advanced EIC payments (sum of all earnings types with type = EIC).
All other lines are not populated by Microsoft Dynamics SL and must be filled in by the user (indicated by the underline).
NOTE: 5a, 5b and 5c will not be correct if FED6 is not attached to box 6 using the W-2 Control tab of Deduction Maintenance.

UNEMPLOYMENT TAX WORKSHEET CALCULATION:

NOTE: This is a worksheet to be used in filing the actual tax return. Microsoft Dynamics SL does not populate all necessary boxes on the return and cannot print a return for filing purposes as manual adjustments may be necessary.

This report must be run for each state that has employment activity and federal (FED4).

State Unemployment Deduction ID: Unemployment Deduction ID.
State Tax ID: ID used for filing purposes – may be state or federal.
State Name: Name of location for which the report is processed.
Tax Rate: Deduction fixed percentage/rate/or amount.
Annual State Wage Limit: Max YTD Subject Base amount from Deduction Maintenance Deduction ID.
Annual FICA Wage Limit: Max YTD Subject Base amount that is set up in the Deduction Maintenance dialog box for the Social Security portion of the FICA tax (FED2).
Report for Quarter: Quarter and Year to be processed.
Select the appropriate work locations to be included in the report.
Begin Processing to calculate.
Begin Printing to print the worksheet.

NOTE: This process populates the WRKSUTAD and SRKSUTAG tables in Microsoft Dynamics SL.

UNEMPLOYMENT TAX WORKSHEET RETURN LINE BY LINE:

YTD FICA Wages – Earnings for the quarter and year (not necessarily the same as the YTD Subject Wages of the deduction id).
QTD FICA Wages are determined by summing the QTD gross wages listed in the earnings section of Employee History less any pension amounts that may be exempt from the FICA deduction.
QTD Gross Wages are determined by summing the QTD gross wages listed in the earnings section of Employee History. (This amount is NOT dependent on a deduction being associated with an earnings type.)
QTD Gross Wages less Pension & Sec 125 are determined by summing the QTD gross wages listed in the earnings section of Employee History less any pension amounts that may be exempt from the deduction when running report 02.770 - Unemployment Tax Return.
QTD Taxable Wages are determined by looking at the Earnings Subj Ded Qtr X in Employee History for the deduction when running report 02.770 - Unemployment Tax Report. (Where X is the quarter number i.e. 1, 2, 3, 4 )
SUTA Tax is determined by looking at the Deductions QTR X in Employee History for the deduction that is selected when running report 02.770 - Unemployment Tax Report. (Where X is the quarter number i.e. 1, 2, 3, 4 )

PROCESSING 1099 INFORMATION:

The following information must be populated in order for a 1099 Vendor to print correctly:

The Vendor must have the 1099 Vendor box checked to yes in the Vendor Maintenance dialog box.
The Tax ID Nbr must be populated with the Vendors Tax Identification in the Vendor Maintenance dialog box.
The Default 1099 Box Number must be selected with the correct box in the Vendor Maintenance dialog box.
When the invoices were entered the 1099 Box must be selected.
Sum of the amounts in Boxes 1, 3, 6, 7 and 10 must be greater than or equal to $600.00. This limit is entered in AP Setup. Box 2 or 8 must have an amount greater than or equal to $10.00. Boxes 4, 5, 13, 14, 15a, or 15b must have an amount greater than $0.00. Microsoft Dynamics SL does not support Boxes 9, 11, or 12.

1099 COMMON ISSUES:

Amounts in Box 15b will also populate Box 7 – this is per the IRS regulations and is documented in KB 911813.
The 1099 Preview contains all 1099 vendors regardless of their 1099 amounts. Limits discussed above are only applied when the 1099 forms are printed. KB 846796.
Alignment of 1099 forms is not correct KB 875724.
Company information on 1099 is incorrect – see Company Maintenance. KB 846649.
Types of 1099 Forms that can be printed in Microsoft Dynamics SL. KB 845242.
Accidentally purged the current 1099 year information. KB 848320.

REBUILD 1099 BALANCES USING AP INTEGRITY CHECK:

The Accounts Payable Integrity Check dialog box has a check box for rebuilding 1099 balances. The Integrity Check rebuilds all 1099 balances from AP transaction information for paid vouchers only. For this reason, the following considerations must be made before executing the rebuild procedure:

Data Retention: If AP detail is retained for less than one year, then do not rebuild because removed transactions will not be included in the rebuilt totals.

Balance Initialization: If ‘Init’ mode or some other non-transactional method was used to initialize or reset 1099 balances then do not rebuild because initialized 1099 amounts will not be included in the rebuilt totals. You will have to develop a procedure to update rebuilt 1099 balances using initialization information.

CLOSING THE 1099 YEAR:

The 1099 Calendar Year Control screen is used to ‘close’ a 1099 calendar year. The system specifically identifies 2 1099 calendar years at all times – known as Current 1099 Year and Next 1099 Year. In order to process AP checks, the check date must be within one of these 2 years and the status of that year must be set to ‘OPEN’ in the 1099 Calendar Year Control screen. A 1099 year with the status of “CLOSED” can still have 1099 forms and Magnetic Media processed, but no checks can be processed for that year.

The Process Options include “Change Status” for changing the status of either of the 1099 years; or “Purge Oldest Year” for completely clearing out the 1099 information of the year designated as Current 1099 Year, advancing the Next 1099 Year to become the Current 1099 Year and opening up the subsequent calendar year to become the Next 1099 Year.

MULTI-COMPANY 1099 CONSIDERATIONS:

The 1099 amount is updated for the company that issued the check, regardless of which company was changed for the expense (debited in the grid of the voucher).

See the TY2007YrEndUpd.pdf document included with the Year-End Updates for additional information on W-2 and 1099 reporting.