US Payroll Instructions


 

 

US Federal Withholding Instructions

IRS introduced a new W-4 form for 2020. You should use it for new employees, and for any current employees who want to switch from the old W-4.

Rather than enter a number of exemptions, the new form uses a more complex calculation, and figures an amount to deduct from gross wages. How you set up employees depends on which W-4 form they use.

EMPLOYEES USING NEW W-4 FORM

New employees hired after Jan 1, 2020 must use the new W-4 form. Instead of exemptions, the form calculates adjustments to annual gross income. The employee will need to read several pages of instructions, and do some math!

To calculate the gross annual adjustment, add the amount on Line 3 to the amount on Line 4b, then subtract the amount on Line 4a. Enter that total into Fed Withhold Amount field on the Employee account record (click the Payroll Setup button to see it). If line 4a is large, you may need to enter a negative number.

In the Tax Package field, enter the 2020 W-2 tax package for your state (if not visible, you will need to import 2020 payroll first). Some states have multiple tables for different marital status or local tax rates. There will be 2 versions of each, for old and new W-4 forms. Use one that is marked 2020.

If the employee requests additional withholding on Line 4c, do the following:

  1. Enter the amount from line 4c into the employee's Other Withhold Amount field. If the employee calculated an annual adjustment, divide it by the number of pay periods.
  2. Choose Payroll Setup from the Costs menu, and choose Tax Tables from the submenu.
  3. Open the Federal Single 2020, Federal Married 2020 or Federal Head of House 2020 Tax Table (whichever applies to the employee).
  4. Choose Add Other Amount in the Third Adjustment popup field.
  5. Turn on the Adjust After Table is Computed checkbox beneath it. Note that this will deduct the full amount from every paycheck.
  6. Click OK to save changes.

EMPLOYEES USING OLD W-4 FORM

Employees who alread filed a W-4 may continue to use it. For them,enter the number of claimed exemptions in the Fed Exemptions field in each Employee account (click the Payroll Setup button to see it).

In the Tax Package field, use the plain tax package for your state, not one that is marked 2020 W-2. Some states have multiple tables for different marital status or local tax rates. There will be 2 versions of each, for old and new W-4 forms. Use one that is not marked 2020.

If an employee claims additional federal withholding on their W-4 form, enter it into the Fed Withhold Amount field in the Employee account record (click the Payroll Setup button to see it). If the employee calculated an annual adjustment, divide it by the number of pay periods. Also follow these steps to make sure the additional withholding is included:

  1. Choose Payroll Setup from the Costs menu, and choose Tax Tables from the submenu.
  2. Open the Federal Single or Federal Married table as appropriate.
  3. Click on the Second Adjustment popup field, and choose Add Federal Amount.
  4. Turn on the checkbox for Adjust After Tableis Computed. Note that this will deduct the full amount from every paycheck.
  5. Click OK to save changes.

All Employees

Use the following to determine the value for the Marital Status popup menu in each Employee account:

  • Single- single employee with one personal exemption
  • Married- married employee with two personal exemptions
  • Dual Income- married employee with one personal exemption
  • Head of House- unmarried employee claims Head of Family status
  • Other- not used

NOTE--: A few states use slightly different conditions for the marital status choices. Follow the links at the bottom of this page, to see specific instructions for your state.

Goldenseal will automatically calculate the correct federal withholding for each pay period.

Medicare Employee Withholding

Starting in 2014, there is an additional .9% employee withholding for Medicare that kicks in after an employee has earned $200,000 in a year.

NOTE-- This is the first time we experienced a deduction that is structured with a bottom limit! Our existing calculators didn't handle this case, but we added it in the version 4.9 update. We now have a deduction line item for the extra .9%, but do not automatically include it. Add it to your Tax Packages, if an employee earns more than $200,000 per year.

FICA EMPLOYEE WITHHOLDING

The employee withholding rate for Social Security was reduced temporarily, from 6.2% to 4.2%, between Jan 1, 2011 and Dec 31, 2012. As of January 1, 2013 it returned to the original 6.2% rate.

Earned Income Credit

The option to get advance payments of the EIC tax credit expired on Dec 31, 2010. Taxpayers can still get a credit when they file their tax return, and they may adjust their withholding allowances to reduce withholding amounts. However they won't be able to get a credit added to their paychecks for wages in 2011 or later.

For a while we kept the 2010 EIC tax tables available, in case the credit advance was reinstated. However, with Republicans in power, that seems unlikely enough that we removed them in 2020.

If you previously gave the EIC tax credit to some of your employees, follow these steps to remove it for wages in 2011 or later:

  1. Choose Payroll Setup from the Costs menu, and choose Tax Packages from the submenu.
  2. Click on the Tax Package that includes Advanced EIC credits.
  3. Click the Edit button.
  4. Click on the Advanced EIC item to remove it in the package.
  5. Click OK, then click Close to leave the Tax Package setup.