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Is Microsoft Dynamics GP calculating Payroll taxes correctly?

Terry R Heley Profile Picture Terry R Heley Microsoft Employee

You know, that is a great question.  Many times in support, we will get questions on our payroll tax calculation as users may feel it may be incorrect.  Or how do we back into this complex monster of a calculation you ask?

Below is a great knowledge base article that gives you the steps of how Microsoft Dynamics GP annualizes its payroll calculation of taxes.
855655 Federal Tax Calculation

Because Microsoft Dynamics GP annualizes its taxes, what drives the calculation is the pay period or the frequency fields on your pay codes, benefits, and deductions.

A common misconception when customers call is they may have the pay code pay period field set to weekly, as they have a weekly payroll, but the deduction will be set to monthly as it is only taken out once a month.
The frequency field on a deduction/benefit does not control when the deduction is taken, but instead the tax calculation of that deduction, who would have thought?

We may also see a customer say I am paying a bonus and hardly any taxes are getting taken.  If you look at the pay period of the bonus pay code, it is annual, as it is an annual bonus, not realizing this affects tax calculation.

Another secret in support is this cool free website.  It is a tool that allows you to do what if scenarios and verify if Microsoft Dynamics GP taxes are really correct!

Now you all know me well and yes, I like to back into the calculation with my pencil, paper and trusty calculator to make sure everything is in check with what it should be.

Also, with the 2020 W4 it did change how taxes are calculated a bit with the new Dependent Claim Field, so I thought it was best to put this new information together so we can all learn tax calculation 101 again!

In the 2020 Tax Calculation document are some examples and how you back into the number that is calculated in Dynamics GP.  In these examples, I'm using a 2020 payroll tax table, unless otherwise noted.

Taxes are so much fun, hope this information is helpful to you.

Terry Heley 


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