EPY: Federal Withholding Occurring Before Mandatory Employee FICA/MED Tip When Federal W4 Has High Other Income (Doc ID 3020271.1)

Last updated on MAY 06, 2024

Applies to:

Symptoms

Federal Withholding occurring before mandatory employee FICA/Med tip tax amount when Federal W4 has high Other Income amount.

An hourly employee, who happens to claim 200K OI on FED W4, received a tip and properly claimed it as a reported tip processed through payroll it is processing Federal Withholding before FICA/MED tip on paycheck.

When processing the amount on a low net pay, the Federal withholding amount should not occur before the employee's FICA/MED Tip amount when there is a low net pay.


The issue can be reproduced at will with the following steps:

1. Create an earning code ie. “TPP” for Reported Tips - Set up HCM>Product Related>Payroll for North America>Compensation and Earnings>Earnings Table
2. Process a hourly employee ie. hourly rate of 21.63 - Workforce Administration>Job Information>Job Data
3. Go to Federal Tax Data in correction mode and entered the Other Income as $200,000.00 - Payroll for North America>Employee Pay Data USA>Tax Information>Employee Tax Data
4. Create a paysheet and enter 18 hours for REG and $40.00 for TPP - Payroll for North America>Payroll Processing USA>Create and Load Paysheets>Create Paysheets
5. Run the payroll calculation - Payroll for North America>Payroll Processing USA>Produce Payroll>Calculate Payroll
6. Go to review paycheck taxes that shows the tax is not taken for OASDI/tip/EE and Med/tip/EE since the system looked at FWT first - Payroll for North America>Payroll Processing USA>Produce Payroll>Review Paycheck
6. Go back to the Federal Tax Data in correction mode and change the Other Income to $52,000.00 - Payroll for North America>Employee Pay Data USA>Tax Information>Employee Tax Data
7. Ran the payroll calculation - Payroll for North America>Payroll Processing USA>Produce Payroll>Calculate Payroll
8. Verify the review paycheck taxes that shows the OASDI/tip/EE and Med/tip/EE is being taken before the FWT - Payroll for North America>Payroll Processing USA>Produce Payroll>Review Paycheck

Changes

Cause

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