Q: Why does the FICA Amount from version 2.4 not match the Social Security + Medicare amount from version 3 for some wage totals?

Back to Ledger/Payroll FAQ Page

A: The amount of FICA withheld in version 2.4 is calculated by multiplying the FICA wages by the FICA rate. In version 3, the FICA components of Social Security and Medicare a calculated separately. The amount of Social Security withheld is calculated my multiplying the FICA wages by Social Security rate. The amount of Medicare withheld is calculated and multiplying the FICA wages by Medicare rate.

A simple example shown below demonstrates the problem. An employee earns $7.50. A comparison of calculations from version 2.4 and 3 is shown below:

Version 2.4:
FICA Withheld = FICA wages * FICA rate = $7.50 * 0.0765=0.57375
This amount is rounded to the nearest penny for a total of $0.57.

Version 3.0
Social Security Withheld = FICA wages * SS Rate= $7.50 * 0.062 = 0.465
This amount rounded to the nearest penny for a total of $0.47.
Medicare Withheld = FICA wages * MC Rate= $7.50 * 0.0145 = 0.10875
This amount is rounded to the nearest penny for a total $0.11.

The total amount withheld from version 2.4 is $0.57. Only one round off was performed for FICA. The total amount withheld form version 3 is $0.58. Two round offs were performed, one each for Social Security and Medicare.

Running both versions 2.4 and 3 "side-by-side" for comparison purposes:
This can present a problem for those users who are running both versions at the ame time for comparison purposes. In a worst-case scenario, you could be off by a penny per check for the entire payroll batch.

From employees where the differences exists, you can insert a line in version 2.4 in the Wage/Withholding screen with a type of FICA-EXT and fixed amount of $0.01. In a similar manner, you can use the Social Security-Extra and Medicare-Extra types in version 3.

This method will work for salaried employees who are always paid the same amount. For employees whose pay varies with each check such as hourly employees, you may need to make adjustments to the checks before printing.

Back to Ledger/Payroll FAQ Page