Frequently, a customer will generate their payroll for the first time in Lizzy, and comment and worry because Lizzy’s payroll figures for a given employee don’t match what their figure was in their old system.
There are a couple of reasons for this. [Note: We are making the assumption that everything is set up properly regarding Federal/State Allowances, and you have set up your deductions properly regarding what taxes they affect ]
First – on the federal level, the IRS has multiple ways for calculating an employee’s withholding. The have the Percentage Method, the Annualized Percentage Method, and the Wage Bracket Method. If your old system comes to an even dollar amount – odds are they are using the Wage Bracket Method ( as it deals in whole dollars ). Lizzy uses the Annualized percentage method. If you grab a Circular E from online ( just google it ) and run your amounts under the Annualized percentage method, you should come to the exact same amount by hand that Lizzy does.
FUTA – if your FUTA doesn’t match – there should only be one reason for that. Since FUTA is a flat % ( either 6% or .6% if your state has its own unemployment [in 2012] ) the calculations should match, and if they don’t this would be because you haven’t entered your YTD info, and it could be that your employee has either a) capped or b) will be capping on this paycheck.
State withholding – Similar to Federal – State’s usually have mulitple methods for calculating the withholding. We always use Annualized when the state allows it, otherwise we use the their percentage method. Again – calculate it by hand – it should match to Lizzy.
But you’ll notice that if you calculate it by hand this way, it doesn’t match your old system. So, is your old system wrong? Of course not. You will also notice that the figures are very close to each other. In some instances the Percentage Method vs the Annualized percentage method are just off by a couple of pennies. And again, most bracket methods round to an even dollar amount.
So before you start to think Lizzy is wrong – check out the math… just because Lizzy doesn’t match, doesn’t mean Lizzy is wrong.