ezAccounting software includes the payroll feature. If you have question about federal tax calculation, please view this guide.
Issue #1: $0 Federal Income Tax
Two reasons can cause the such issue:
1. The employee's income is not high enough to withhold federal income tax or this employee claimed high number of exemptions
You can test it easily by increasing the payment.
2. On employee set up screen, the "federal income tax" option is unchecked by mistake. You can edit employee tax option to solve this issue.
Issue #2: Incorrect Federal Tax Calculation
1. If you select the wrong pay period(ie: weekly, monthly) from company settings, you may see this issue.
2. Such issue may be caused by pre-tax deduction. When you generate a paycheck, you can view the summary part. If the Taxable Income is lower than the Gross Income, that means you set up some deduction that is exempt from federal and state taxes.
Solution:You can review each dedution details. If the deduction is set up to be exempt from federal and state tax by mistake, please change the option. After you delete the wrong paycheck, you add new paycheck. You will see the correc federal and state tax amount.
Issue #3: The W4 option change
IRS published the new 2020 Version W-4 with major change: allowances are no longer used for the redesigned Form W-4. All new employees first paid after 2019 must use the redesigned form. Your employees may see more or less federal tax if they change W4 option.
You will see the W4 option when you add/edit an employee's settings.
If you like to calculate federal tax manually, here are the steps:
ezAccounting software is the right in house accounting solution for small businesses needing to document and report on incoming and outgoing cash flow including sales, receipts, payments and purchases. It also supports payroll processing and tax form printing.
If you have not installed this software, you can download and try it free with no obligation and no credit card needed.
This accounting software is compatible with Windows 11, 10, 8, 7, Vista and other Windows computers.
ezAccounting makes it easy to track income and cost!
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