How do I pre-balance Payroll Year-end Reports?
2023 Payroll Year-end Checklist
You can take these preliminary steps to balance the Payroll Year-end Reports: 941 Report, Employee Tax Summary, and Pay Code Transaction Report. Balancing the Payroll Year-end Reports is not required but it will make it easier for you to complete the Payroll Year-end Checklist. It will also help with taxes, printing W-2s, and closing year end. And when you do complete the Payroll Year-end Checklist, pre-balancing these reports will limit the search range to the last pay period.
Important! The 941 Report calculates taxes differently from the Employee Tax Summary and Pay Code Transaction Report. The report totals will differ by a couple of pennies. When you balance these reports, it's acceptable for the report totals to be a couple of pennies off.
When should I pre-balance Payroll Year-end Reports?
Complete this step before you run the last payroll in the calendar year. This step is not mandatory. However, it will make it easier to finishing the Payroll Year-end Checklist.
How much time will I need?
That depends. If the Payroll Each Pay Period checklist has been completed for each pay period, then balancing these reports should be straightforward. If the Payroll Each Pay Period checklist has not been completed each pay period, you may need to allow additional time for troubleshooting.
First, print 941 Report, Employee Tax Summary, and Pay Code Transaction Report
When you set up the report, change the report date range to select Quarterly. You want to print the report for the calendar year (01/01/YYYY to 12/31/YYYY).
Print the Employee Tax Summary
Print the Pay Code Transaction Report
Second, verify the Social Security and Medicare amounts on the Pay Code Transaction Report
This step will check if the Social Security and Medicare amounts paid by the employee and employer are correct.
The Pay Code Transaction Report will tell you the amount that is recorded as the Social Security or Medicare amount. You can use this report to find out how much should be recorded as the employee or employer contribution to Social Security or Medicare.
If the Social Security or Medicare amounts do not match, it means an incorrect amount is recorded and it needs to be corrected before the reports will balance. Start by checking the Social Security amounts and then check the Medicare amounts.
Check the Social Security amounts
Check the Social Security amounts
The grand totals for the Social Security Employee and Employer amounts print at the end of the report. Make sure both columns show the same total.
Social Security totals on the Pay Code Transaction Report - IRS Tax Year
Does the Social Security Employee total match the Social Security Employer total?
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Yes, the Social Security amounts match. That's great news, you're ready for the next step.
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No, the Social Security amounts DO NOT match. You need to review the employee settings to find the incorrect Social Security entry. Start your search by finding the employee with the incorrect Social Security amount and then find the date when the incorrect Social Security amount was recorded. Then, correct the entry, recalculate the employee's benefits, and then rerun the Pay Code Transaction Report, Employee Tax Summary Report, and 941 Report for the calendar year.
Check the Medicare amounts
Check the Medicare totals at the end of the Pay Code Transaction Report. Make sure both columns show the same total.
Medicare totals on the Pay Code Transaction Report - IRS Tax Year
Does the Medicare Employee total match the Medicare Employer total?
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Yes, the Medicare amounts match. That's great news, you're ready for the next step.
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No, the Medicare amounts DO NOT match. You need to review the employee settings to find the incorrect Medicare entry. Start your search by finding the employee with the incorrect Medicare amount and then find the date when the incorrect Medicare amount was recorded. Then, correct the entry, recalculate the employee's benefits, and then rerun the Pay Code Transaction Report, Employee Tax Summary Report, and 941 Report for the calendar year.
Third, verify the Federal Social Security and Medicare amounts match
Check if the Social Security and Medicare amounts for the employee and employer on the 941 Report (1/1/YYYY to 12/31/YYYY) match the Social Security and Medicare amounts on the Pay Code Transaction Report (1/1/YYYY to 12/31/YYYY).
The Employee Tax Summary Report will show you what the Social Security and Medicare totals should be.
Compare the Social Security wages on the 941 Report and Employee Tax Summary Report
Write down or make a note of the total from Line 5a Taxable Social Security Wages on the 941 Report. (There's a worksheet at the end of each section to help you track and compare amounts.)
941 Report, Taxable Social Security wages
Next, use the Pay Code Transaction Report to total the Social Security Amount paid by the employees and employer.
Social Security Employee Amount + Social Security Employer Amount = Taxable Social Security Wages
Social Security Employee Amount and Social Security Employer Amount on the Pay Code Transaction Report
Federal Social Security Amounts
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Social Security Amount Remember, the Pay Code Transaction Report and 941 Report calculate this amount differently. The total may be off by a couple of pennies. |
___________________________ SS Emp Amt + SS Empr Amt = Taxable SS Wages |
___________________________ Line 5a: Taxable Social Security Wages |
Compare the Federal Medicare wages on the 941 Report and Employee Tax Summary Report
Write down or make a note of the total from Line 5c Taxable Medicare Wages & Tips on the 941 Report.
Taxable Medicare Wages & Tips on the 941 Report
Next, use the Pay Code Transaction Report to total the Medicare Amount paid by the employees and employer.
Medicare Employee Amount + Medicare Employer Amount = Taxable Medicare Wages
Medicare Employee Amount and Medicare Employer Amount on the Pay Code Transaction Report
Federal Medicare Amounts
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Medicare Amount Remember, the Pay Code Transaction Report and 941 Report calculate this amount differently. The total may be off by a couple of pennies. |
___________________________ Medicare Emp Amt + Medicare Empr Amt = Taxable Medicare Wages |
___________________________ Line 5c: Taxable Medicare Wages & Tips |
Troubleshooting
What if the 941 Report does not match the Pay Code Transaction Report?
What if the employee is exempt from Federal and State withholdings and their pay code is inactive?
What about employees who have exceeded or will exceed the maximum contribution limit?
Which report shows terminated employees?
202311, 2023Nov15
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