State Payroll Withholding (Jan 6)

Yesterday, TurtleSoft released 2021 payroll tax tables for our accounting software. It’s our 31st year of doing so.

We kinda got into the payroll software business without meaning to. Its origins are similar to our estimating and accounting software. Turtle Creek Construction never had actual payroll: back then it was easier to pay under the table, especially for short-term workers. But as the software biz ramped up, suddenly there were actual white-collar employees who needed withholding, FICA and the whole nine yards.

Eventually, the early cobbed-together payroll spreadsheets were good enough to include in MacNail Accounting. It started with just New York and California, but expanded to the whole US a year later. The whole system improved vastly in Goldenseal, and we even added Canada.

Updating US payroll is quite the PITA. 50 states is a lot to wade through. Even worse, many states have found odd-ball ways to calculate withholding, and most years there’s at least one state that finds a new, even wackier way to do it. I think creating tax formulas is probably one of those low-status jobs that gets pawned off on some lowly official, or maybe the brother-in-law of the Governor.

A couple years ago, Utah changed their payroll withholding formulas to something complicated that Goldenseal couldn’t handle. Rather than write new code for just one state, we decided to graph their numbers, and figure how to match them. It turned out to be a straight line. So we now have a simple one-step table that gives the exact same results.

Connecticut is even worse. I think they must have disliked some part of their “tax curve”. Rather than tweak it, they added another table to correct it. Then that caused new problems, so they added another table. Then that still wasn’t right, so they added a couple more: including the Table C 3% Tax Rate Phase-Out Add-Back table. Dave Barry would consider it a bad name for a rock band. Someone with basic math skills could simplify the whole mess in a day or so, but I’m sure the political and bureaucratic process would drag out for months or years.

There’s a similar problem happening with the response to Covid-19. States and local health departments and governments are kind of on their own. Everyone is guessing and improvising.

The good news is that it will provide interesting data. Maybe we’ll learn from the mistakes.

Dennis Kolva
Programming Director

Author: Dennis Kolva

Programming Director for Turtle Creek Software. Design & planning of accounting and estimating software.