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Re: PY US: Federal with-holding tax calculation not done correctly for bonus wages

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Quick enduser feedback

Many 401K plans do not allow for 100% deferral because of need for other taxes to be paid by employee such as medicare and social security. Perhaps suggest back to end-users plan redesign limiting IT0169 deferrals to some limit like ~80%

 

If employee receives $10,000 bonus with 100% deferral I would still expect to see some 401K federal taxable wages for the amounts not deferred to cover ssn/med taxes. Employee cannot defer 100% because other taxes must be paid. This creates kind of reverse grossup.

 

Sample Math:

 

10,000Gross Wages Bonus
8,980401k pretax defferral
1,020FED taxable wages
255FED TAX @ .25
620SSN TAX @ .62
145MED TAX @ .0145
1020SUBTOTAL TAX
0.00NETPAY

Also will have state taxable wages too. But not all states handle 0169 deferrals the same so not included that part.

 

Sorry I cannot give technical advice. I am HR/Payroll manager not experience SAP consultant. I would suggest against 100% defferrals for IT0169 plans though.

 

Good luck.


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