Medicare Additional Tax (FICA MCAD)

Version 9.1.611.036 refines payroll processing for Medicare Additional .9% Penalty so that is it is no longer necessary to predict when the user will exceed the $200,000 and enable / disable the Always W/H flag on the Employee Tax Tab's FICA MCAD entry.

This functionality is enabled by changing the FICA MCAD Tax Table as describe in Step 1 below. If you change the Tax Table, you must also complete steps 2-4 below or the additional Medicare tax will NOT be deducted properly.  If you do NOT change the FICA MCAD table, you may continue to as before.

Step 1. Tax Tables

FICA MCAD - the Base Tax tab must be changed to specify the following lines so that the first $200,000 of earnings will be exempt from the 9% penalty. This change is what triggers the new behavior.

Step 2. Tax Authority:

Verify that the FICA MC Authority is NOT set to Annual Compute.

Step 3. Employee Record

In the Employee record's Taxes Tab, employees should have the FICA MC AND the FICA MCAD flagged as Always W/H all year. This configuration can be applied to ALL employees, however this is most conveniently applied at the beginning of the Payroll Year.

Step 4. Payroll Adjustments (if new functionality is enabled mid-year)

If the new functionality is to become effective for the current Payroll Year in process then a PR Journal Adjustment will need to be applied for each employee subject to the tax in order to synchronize Taxable and Exempt values pertaining to Tax Table FICA MCAD.

There are 3 possible starting points in such cases that are best identified by running Report PR Summary for the period 1/1/2017 – date of the last posted PR Check.

#1. Employee has no prior tax history related to FICA MCAD

Option #1: Delay adding or designating FICA MCAD as “Always W/H?” until commencement of Payroll 2018.  Recommended if employee is not expected to exceed $200,000 for the current year.

Option #2: Create a PR Adjustment transaction to initialize FICA MCAD for YTD activity.  Value for FICA MCAD “exempt earnings” should equal FICA MC “taxable” + “exempt” per the PR Summary Report.  Recommended if employee is remotely likely to exceed $200,000 for the current year.

#2. Employee does have some prior tax history related to FICA MCAD and has not yet exceeded $200,000 in subject wages this year.

MUST!!!: Create a PR Adjustment transaction to initialize FICA MCAD for YTD activity.  Value for FICA MCAD “exempt earnings” should equal FICA MC “taxable” + “exempt” per the PR Summary Report.

#3. Employee does have some prior tax history related to FICA MCAD and has already exceeded $200,000 in subject wages this year.

MUST!!!: Create a PR Adjustment transaction to initialize FICA MCAD for YTD activity.  However an exact prescription for the adjustment that will be required is subject to additional and specific analysis.