Frequently Asked Questions - LexisNexis

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When a tax is selected, its calculation is based on the Gross Wages plus the Employer Contribution. When a tax is not selected, its calculation is based on the Gross Wages minus the Employee Contribution. In this illustration, the federal income tax calculation is based on the gross wages plus the company contribution. The calculation for all other taxes is based on the gross wages minus the employee contribution. To handle more complicated tax calculations, set up the employee contribution as one pretax deduction with its own set of tax rules and set up the company contribution as a second pretax deduction with its required tax rules. Consult the firm's accountant or plan administrator to determine which tax rules to use with the plan. • Contributions per period Enter the percentage of gross wages to deduct from the employee's pay plus the percentage contributed by the company. • Company paid portion Enter the percentage of the total that is paid by the company. • Yearly maximum If there is a maximum the employee and company can contribute per year, enter the amount in this box. When the total contributed by the employee and the company reach this amount, Payroll will stop deducting for this plan. • Paid so far this year If Payroll was just installed and contributions have already been made this year, enter the amount already contributed by both the Employee and the Company in this box. • W2 box To show the total employee contribution on the W2 form, select a box number. Box 13 and 14 require a Code or Label that identifies the plan. Consult the firm's accountant or plan administrator to determine the proper code or label to use. Example: Alumni Law Firm has a retirement plan to which both the employee and the employer contribute. The employee contribution is 3% of their gross wages. The employer will contribute another 3%. The maximum contribution for both the employee and employer is $6000 per year. When taxes are calculated, federal income tax, state income tax and local income tax are based on the gross wages minus the employee contribution. All other tax calculation are based on the gross wages. The employee contribution must be reported in Box 13 with a Code of D. The following illustration shows how to set up the retirement plan: A 401(K) Plan Type is used because the federal, state and local tax calculations are based on the gross wages minus the employee contribution. All other taxes are based on the gross wages.
Notice how the Contributions per period box contains a 6 - meaning that a total of 6% of the gross wages will be contributed toward the plan. The Company paid portion is 50%, meaning half of the contribution is paid by the company. For example, if the gross wages are $1000, the total contribution is 6% of $1000 - $60.00. Half of this amount is contributed by the company and the other half is deducted from the employee's pay. How can I check the year-end W2 figures in Payroll? Run a Payroll History report (Report > Pay History) from January 1 to December 31 and compare the figures to a W2 Information report (Report > Employee > W2). Take into consideration that taxable wages may be higher or lower than gross wages if you have taxable benefits, company benefits, non-cash earnings, non-tax payments or pre-tax deductions such as 401(k) or cafeteria plan. For Former Timeslips Users I’ve just converted from Timeslips® to PCLaw. What differences in terminology should I be aware of when using PCLaw? The following table compares Timeslips® and PCLaw terminology:
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Frequently Asked Questions - LexisNexis

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