Preparing Pensoft Payroll for Year End

Note: Instructions are available for printing in PDF form

Current Telfarm clients using PenSoft should follow the “Important Installation Information” from PenSoft to update (transfer) to a new year.  
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The following instructions were written by Telfarm staff using guidelines interpreted from PenSoft Payroll Solutions material to help you verify year end accuracy before producing various government reports.  PenSoft Payroll Solutions is not responsible for its content.  If you find that there are discrepancies in your records as you attempt to reconcile for year end reporting, program support is available through Telfarm and PenSoft.  Refer to your “PenSoft Payroll Plus Users Guide.”

If you find it necessary to modify or delete a payroll record please refer to Chapter 4 – Payroll.

Auxiliary Reports

Reports > Tax Reports > Auxiliary Reports >  Subject Wages Summary Report > Annual

There are several reports here that are helpful.  The subject wage report breaks down the wages subject to a list of taxes.  Subject wages are in brackets [ ]. These reports are a must for yearend (annual), but also excellent resources to include in your reconciliation procedure after every pay period.

If you set up any employees (usually family members) as exempt from withholding taxes, it is important to know that there is a difference between being exempt from withholding (Federal, Social Security and/or State) and being exempt from reporting.  

If you believe that an employee was improperly set up to exempt withholding and/or reporting, please contact PenSoft for the best solution in your situation.

Verify Fringe Benefits

Employee benefits can be taxable; non taxable; partially taxable and tax deferred.  PenSoft applications automatically configure pre-defined fringe benefits to properly allocate tax liability on the Company Deduction List. You may also have set up your own custom pay type fringe benefit.  These employee/employer contributions can impact the tax reporting and liability. If you used one of these deductions, we suggest Chapter 2 – Company:  Company Deduction List through Tax and Deduction Calculations and Chapter 3 – Employees:  Taxes through Deductions.

Reconcile the 943 With the W-3:

Reports > Tax Reports > Form 943 (print)

Reports > Tax Reports > Form W3 (print)

Form W3

Reports >Tax Reports > Forms W3
Check the totals that are reported on the W3.  They are automatically generated from the employees’ combined W2 totals.  In most cases, boxes 1, 3, 5 and 16 should be the same as the 943 lines shown above.  If there is a difference between them, you need to know why.  Differences are generally a result of fringe benefits, family members who are set up as exempt from withholding and/or reporting or commodity wages.

Reconcile the 943 with the FUTA 940

Reports > Tax Reports > FUTA >

Not all payments to an employee are subject to federal unemployment insurance.  If an employee’s income is marked as not subject to FUTA or if a deduction is marked as exempt from FUTA, the amount will be included on Part 2, line 4 of the Form 940.   Print the Exempt List (annual).  You must then print and attach a list of exempt income to the form. 

Print the FUTA Wage List Report and compare the taxable wages to the total calculated from the FUTA Taxable Wages report.  You will have to create your own Taxable Wages report  (see Customized Reports below) and include these headings: 

• Total Income less reimbursements
• Exempt wages
• Wages in excess (manual input)
• Total Taxable FUTA

Tax Deposit Payments on 943

Reports > Tax Reports > 943

If tax withholding deposit payments were made through the Telfarm for Windows Accountant program, then they do not show on PenSoft’s Form 943.  You may enter the total amount you paid as determined from the Accountant program.  However, this method is only to allow you to complete the 943 and does not allocate payments to the appropriate pay period or quarter. 

DEPOSITS > ADD > Select 943 > OK

1. Ignore the date displayed and click on the check liability button
2. Click Setup button and Set Initial Period to Entire Year.
3. Click Refresh button
4. This displays your withholding tax liability for Federal, Social Security and Medicare taxes. 
   • If these totals match your actual deposit payments as determined from your Telfarm for Windows Accountant program, click Apply, then click OK.
   • If any of the figures displayed on this screen are different from your actual deposits, click Apply, then click on the tax type line and change the total to your actual amount deposited for that tax.  Totals will be recalculated and sent to the Form 943 when you click OK.

You may repeat these steps with “MI Income Tax”, “FUTA Tax” and “MI Unemployment Tax” if these taxes also were not paid or previously recorded through PenSoft.  DO NOT EXPORT THESE DEPOSITS TO PAL.

Two helpful reports to run after entering the deposits are:

REPORTS > TAX REPORTS > STATUS (Annual)

REPORTS > TAX REPORTS > BY DEPOSIT.(Annual)

Customized Reports

PenSoft offers flexibility in adding and configuring various features for Company and Employee setup like incomes and deductions.  It can be challenging to identify all user-defined deductions configured as exempt from federal withholding taxes.  There are many reports available to assist you with verifying accuracy.  You may have added some titles that do not appear in the standard reports.  It is helpful to know how to customize your own reports to include and to monitor these descriptions. See Chapter 12 –Reports. 

Reports > Summary Reports. 

• Note the sections titled  “User defined summary reports”.  Click on the blue Report Setup for one of these reports. 
• Type a title and caption to fit your need. 
• Select headings from one of the lists: click on a heading then drag and drop it to one of the white columns headings.
• Create your own “Summary Reconciliation” report.  It should include the following columns:  Total Income; Taxes Withheld; Deductions Withheld; Net Pay.

Preview Employee’s W2s

Reports > Tax Reports > Forms W2 > Select All Employees > Preview > view the first W2 then click the Next button at the bottom of the screen to advance to the next worker.

Preview each employee’s W2 on the screen before printing the W2.  Understanding where the numbers in each box originated will help insure accuracy.  Common mistakes employers make when filing W2s are out-of-balance reports, incorrect employer identification number, incorrect or misspelled employee name and Social Security number.  Refer to Chapter 12 – Reports. 

Changes to employee information (boxes d-f) should be made through Employee > Modify > select the employee and make the necessary changes.   If your company name FEIN or address do not appear in boxes b or c, this must be corrected before printing the W2s.  Company > Modify >  enter FEIN    If the Legal Name box is checked, a business or legal name must be present in the name field.  If you  uncheck the  legal name box, then the program will use your Company name   (Doing Business As).

In particular verify the following boxes on the W2 forms:

Box 1 – Federal Wages Included:  All income marked as subject to federal withholding

 Not included:   Deferred retirement plans (401K),

 Non-tax reimbursements

 Income/deductions marked exempt from federal

Box 3 – Social Security Wages Included:  All wages paid subject to Social Security

 Not Included:  Non-tax reimbursements

                        Income/deductions marked exempt from SS tax

                        Wages in excess of $94,200 (2006)

Box 5 -  Medicare Wages Included: Total wages and tips subject to Medicare tax

             Not included:  Non-tax reimbursements

                                    Incomes/deductions marked exempt from Medicare tax 

CAUTION:  If Box 20 shows a description of Additional Federal or Michigan tax for any employee, it is the result of adding your own description rather than selecting one from the pre-set Income List.  This must be corrected before you print W2s, complete other tax reports and before you begin using PenSoft for the new year.  Call  PenSoft for instructions.  

While the W2 is displayed on the screen, select the Print button at the bottom of the screen.  This allows you to choose the W2 style you prefer (output).  Clients with the Standard version hame only one option : "Fill in the Blanks on an existing form". 

When you are ready to print W2s, first print a few on plain paper before printing on the actual forms.  Hold them up to the appropriate form to check the placement.  If necessary, raise or lower the print through the W2 print screen.  There are no restrictions to the number of times you can print W2s. 

For specific Magnetic Media reporting instructions, please refer to the PenSoft User’s Guide.

Compare PenSoft Payroll totals to Telfarm for Windows Accountant

Accountant

Data Entry > Reports > Payroll Reconciliation >

This report lists the totals linked from PenSoft by selected dates.  For year end, use Range of Dates 1/1 through 12/31 as a Combined report. 

PenSoft

Reports > Paydate Reports > By Deposit >  Annual

PenSoft            =                                   Accountant         

Net Pay                                                          LBR                           

Federal Income Tax                                       FEDWH                      

Social Security – Employee                            SSWH                      

Medicare – Employee                                    SSWH                       

MI Income Tax                                               STATEWH               

Note:  Other deductions may be listed in both reports which do not affect the tax liability.  Example:  Insurance.

Starting a New Payroll Year

1. Install PenSoft Payroll Plus with the New Year CD
2. Follow the “Important Installation Instructions” from PenSoft and the User’s Guide
3. You will need your PenSoft Customer number, Activation Code and Reference Number which are located on your Packing List included with the CD.
4. Follow the Transfer instructions and checklist (current users only)
5. When PenSoft is completely installed for the new year, close it and open PAL.
6. Click the Configure button (DO NOT INITIALIZE).  Enter your Telfarm number and owner number for the 2007 file.