Why is Dynamics GP not withholding taxes from deduction reimbursements when they are paid out without other regular employee wages?
When reimbursing business expenses (or Business Expense pay type transactions *NOT* marked as “Gross Wages”), Dynamics GP will not withhold “estimated” taxes from the reimbursement. For the sake of this statement, “estimated” taxes are Federal, State & Local taxes. Social Security & Medicare are “exact” amounts (there is no tax return on these at the end of the year like Federal withholdings). Dynamics GP will withhold SS/Med taxes from Business Expense reimbursements.
This is by design within the GP payroll module. *IF* the reimbursement is paid with other non-Business Expense wages, Dynamics GP will withhold the taxes on the reimbursed amount from those wages up to an amount that results in a net check equal to the reimbursement amount minus SS/Med taxes. It’s important to note that there are slight differences in how this is handled in different versions of Dynamics GP. There were several “fixes” that occurred in this area from Dynamics GP 2010 through Dynamics GP 2016.
As it applies to the Integrity Data negative deductions product: Because we utilize the Business Expense pay code functionality to reimburse the over withheld deduction amounts, the employee will make up for any tax differences when they file their federal & state tax returns. Federal & state taxable wages will be properly reported on the W-2. If you want to ensure that the taxes are withheld on the reimbursed deduction amounts, you will want to include the reimbursements with regular wages paid to the employee.
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Last Review: 11/21/2018 – Revision: 0.0
Applies To: Negative Deductions Enhancement – GP
Categories: Negative Deductions