Sage 100

Payroll 2.18.1.0 - I just upgraded a customer to v2018. They have pre-tax deductions that aren't pre-taxing. We're in CA. I used tax rule -805002 on the pension plan deduction. The description is Section 401k EE Deduction. The Sage technician just confirmed that it doesn't pre-tax, but seems like it should. I've tried various of the other tax rules, though not all, but I haven't found one that calculates as pre-tax. The tech is researching and talking to engineering. I can't possibly be the first person to discover this problem, right? Are there any 90minders in CA who have come across this problem and know what to do?

According to our research, -805002 reduces Fed and State tax ONLY. We have found if you want it to reduce ALL taxes you have to use -805154 or -805158 Section 125. We are in Kansas and only have upgraded those with Fed & state withholding to deal with so far, have not had any local taxes. We've upgraded around a dozen clients with no huge issues.

I had the same issue see other post, and look at the comments.... https://90minds-com.socialcast.com/messages/38629180

@KarenOLane if it is a 401k plan, then it IS subject to FICA and Medicare, so the rule you used DOES do it correctly by reducing fed and state w/h but not FICA and Medicare wages. We've done test payrolls to confirm it is correct - if it is a 401k deduction, box 12 D code we use -805002. From the IRS web site - Topic Number 424 - 401(k) Plans A 401(k) plan is a qualified deferred compensation plan. If you're eligible under the plan, you generally can elect to have your employer contribute a portion of your compensation to the plan on a pretax basis. Generally, your deferred compensation (commonly referred to as elective contributions) isn't subject to income tax withholding at the time of deferral, and you don't report it as wages on Form 1040.pdf, U.S. Individual Income Tax Return, since it isn't included in box 1 wages on your Form W-2.pdf, Wage and Tax Statement. However, it's included as wages subject to withholding for social security and Medicare taxes. In addition, your employer must report the elective contributions as wages subject to federal unemployment taxes. Some plans also allow you to elect to make your elective contributions on an after-tax basis as designated Roth contributions These comments are scaring me into doing more research since we've already upgraded several clients!

@MaryMays and @ErinOldaker - This has been very helpful! I believe that we now have the deduct codes set correctly for pre-tax Fed WH or pre-tax ALL Fed. The owner will confirm or deny. I just discovered one MAJOR difference between the versions. An override % for fed WH in v2016 calculated 20% of the taxable gross. In v2018, it is not an override % but an additional % added to the regular tax table calculated amount.

@MaryMays Can you confirm that -805002 does pre-tax? Becasue when I checked last time it did not do pre-tax at all and the only other option close to that was the Section 125 plan, but that tax code doesn't tax on FICA or Medicare either (which is incorrect for 401k)

@ErinOldaker - I just retested with -805002. It doesn't reduce taxable income for any of the taxes. -805154 reduces taxable income for FICA and MC, but not FED/ST WH.

@ErinOldaker it is working at our office, reducing Fed and state withholding and NOT FICA and Medicare; see attached. You must be on 2018 PU2 with PR 2.18.1. Have you run the Payroll Status Check utility in PR, Utilities to make sure you have all the things set up ok?

Also @ErinOldaker the codes we use the most have been -805002 for 401k, box 12 D, only reduces Fed/State withholding; and -805158 Section 125 EE Deduction for cafeteria plans that reduces all taxes; no special W2 box codes.. All the pension codes only reduce fed/state withholding. This is correct according to IRS; Cafeteria is only one that reduces all taxes. Roth reduces NO taxes. We did dummy payrolls for 2 days testing all these rules before we upgraded our first client to verify which ones to use.