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Postings here will focus mainly on Advanced Accounting software updates, tips, and related topics. They will also include general comments relating to troubleshooting PC/Windows/network problems and may also include reference to our other software products and projects including any of our various utilities, or to the TAS Premier programming language. We considered setting up separate blogs for different topics so that users/others could subscribe to topics mostly aligned with their interests, but decided that it would be better to keep things simple since some topics cross over into others. We would nonetheless welcome your feedback/input in this regard. Our web site URL is www.addsuminc.com. Call us at 800-648-6258 or 801-277-9240. We also maintain www.advancedaccounting.us so that older Business Tools users in particular have a greater chance to find us.

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Wednesday, May 30, 2018

Use relative paths for e-mail attachments

When an attachment (such as a sales invoice, statement, quote, or purchase order) has to be automatically created for inclusion with an e-mail to be sent from a software program, the attachment normally has to be saved somewhere before it can be attached to the e-mail.  Once the e-mail is sent, the attachment can then be deleted (or optionally retained).

In Advanced Accounting, there is a setting for the attachment path for this purpose.  In establishing this path, sometimes users create a path that is only accessible by a single computer.  If the same path, whether locally or across the network, doesn't exist from the point of view of other client PC's on the network, users working from those PC's will not be able to send e-mails with automatically created attachments.

While you could use a local drive letter with a subdirectory path that exists on every PC, that could still create issues when a new PC is later added or replaced on the network and the same path then doesn't exist from the perspective of that PC, plus it means that attachment files (typically PDF's) could be littered across the system rather than exist centralized (if retained).   Or the local path could be different for every user on the network as well (might be important only if the e-mails are being retained rather than deleted).  One reason to create a local path would be to protect confidential attachments (created in PDF format).  But most accounting software documents that are commonly e-mailed are not so highly confidential that they can't be placed on a shared network drive (and for those documents, a subfolder with limited read/write access could be created), and they are deleted after being sent, there is really little to no possible exposure of confidential information.

So for ease of maintenance and to most easily allow all users to be able to send e-mails with attachments, we would recommend using a simple relative path for all users (based on how different file attachments are named automatically when created by the software, there is also little chance of a file conflict between two different users sending e-mails at the same time; to date in fact we've never seen that happen).  Or depending on e-mail settings selected, a different relative path could be used for each user logon if you are retaining e-mails sent (but is normally not necessary).

A relative path is simply a path that uses your current directory path and that causes the operating system to navigate to that path based on that directory.  In comparison, an absolute path specifies the entire path to reach that folder starting with either a drive letter and then one or more subdirectory names (folders) to reach the ultimate path.

For example, assume the program sending e-mail is installed in an upper level folder called Somemainfolder.The path C:\Somemainfolder\TempFiles would be an example of an absolute path where temporary files might be stored.  A UNC path such as \\SomeServerName\SomemainFolder\TempFiles would be another example of an absolute path.  If the server name changes later, then the UNC path would no longer be available.  If the C: drive path is used, attachments will only be able to be created on PC's that have that exact same path on their local drive.  If a drive-mapped absolute path such as F:\Somemainfolder\TempFiles is used, then that has the chance of working as long as F: always remains available in the event of a server migration.   

But a relative path is even simpler.  In the example above it would be:

TempFiles\

(It is important that there is only an ending backslash.)

So regardless of how the program is launched nor where the software is moved later, as long as it starts with the working folder Somemainfolder, the TempFiles\ subfolder will be available (and assuming end users have read-write access rights to subfolders under the main folder which typically they do).

We like to place the temporarily created files used for e-mail attachments in a folder under the company data folder within the Advanced Accounting subdirectory structure.  Since Advanced Accounting has a separate subfolder for each company's data set, and since the main company data is usually in a folder called MainData, then the relative path might instead be:

MainData\TempFiles\

When the e-mail is generated, it will be able to then create the file in that path, and attach it to the e-mail form.

While you can use spaces in folder names, we would recommend using short, simple folder names without spaces.

In the case of Advanced Accounting, the path setting is created in either one or two places:

(1)  If you are using a global setting (same e-mail setting for all users which is required if logon codes are not being used) then via SY-N E-mail Setup and with Global checked, click on OK;

(2)  If in SY-N you have selected Per User Logon, then settings per user are established via SY-C-A where you would highlight the desired user logon, click on Edit and then click on the E-mail Settings button.  Settings established based on user logons is recommended.

In the event of either approach selected, in the middle of the e-mail options setup screen, the attachment setting can be established:


E-mail attachment setting using a relative path



If the desired path does not exist, when you click on the Save button you will be asked:

The attachment path entered does not exist. Would you like to create it?

Simply answer "Yes"  and the path will be created for that setting.   Once created, that same relative path can be used for other user settings as well.




Monday, April 30, 2018

Utah up next plus new Oregon transit tax

Utah changes its income tax withholding formula effective May 1, 2018:

Utah is the latest state to make income tax withholding changes as a result of the ongoing fallout relating to federal income tax legislation passed late last year.  These changes go into effect on May 1, 2018.   While these changes should be implemented by sometime in May in terms of employer withholding, Utah reduced its effective tax rate slightly (from 5% to 4.95%) retroactively effective to the first of the year.  Corporate income tax rates were similarly decreased.  

Just looking at the percentage change however does not tell the whole story, nor does the summary of changes provided by the Utah State Tax Commission fully outline what has changed.  Buried withinin the updated publication 14 document:

  • No longer is there an allowance of $125 multipled by withholding allowances (see further comment below)
  • Base allowances have been increased  from $250/single and $375/married  to $360/single and 720/married
  • Exempt wages have been changed from $12,000/single and $18,000/married to $7,128/single and 14,256/married.  

Utah does not have its own W-4 form and has used the IRS W-4 form.  The IRS W-4 form however still asks for the number of allowances.  In Advanced Accounting there has always been a separate entry field for state allowances (under the label St) in addition to federal allowances (plus the ability to add an optional additional amount for either as well).  But in light of this change, any number entered in the state allowances field will now be moot because the Utah formula no longer takes those allowances into account in computing state income tax withholding; and the new tables published similarly show computed tax amounts solely for "Single" and "Married" with no allowances. This is a significant departure from the past.  So while an employee could claim five (5) allowances which still (at least for now) makes a tremendous difference in the federal income tax withholding calculation, as of May 1 it makes no difference at all in the Utah state income tax withholding calculation.

Curiously, the there is no also difference in the single and married withholding amounts once a certain wage amount has been attained (at about $1,338/weekly; $5,800/monthly).

The 1.3% multiplier has remains unchanged. 

Overall these are changes with unintuitive consequences.  For some employees these changes may mean relatively little.  In our quick testing of the old rates versus the new, the difference that all of these changes make seems to be on balance quite small, sometimes slightly more, sometimes less.   It all depends on income levels as well as allowances that were previously being claimed.  Employees with high allowance numbers may be surprised by how much their Utah state income tax increases.  Our testing shows that an employee claiming a single status with formerly five (5) federal/state allowances earning $3,000 (taxable) per month will see a monthly increase of $46.00; and a married taxpayer with the same allowances and earnings will see a monthly increase of $26.00.  For a single or married employee with the same earnings but no allowances, the withholding amount is essentially the same for single status employees both before and after the May 1 change, but for an employee that is married, a decrease of $26.00/mo. can be anticipated.

There are no "UT" tax tables in Advanced Accounting's PR-K (Maintain Tax Tables) since, as with several states, the withholding logic is embedded in the program option (PR-B) that performs the calculations, because the logic doesn't follow a traditional tax table approach.   So Advanced Accounting users with Utah employees will need to obtain a program update from us to implement this change (this change has been made and an update is available; it is the first change that we've had to make to the Utah income tax withholding logic in over ten years).

Another Utah change relates to the filing of quarterly returns which now must be made on-line which can be completed by establishing a TAP account (see link below) and submitting the information via an on-line form

Utah has for several years also required the electronic filing of W-2 forms for all employers (which is unusual compared to the rest of the country, although the trend is clearly in the direction of lowered thresholds; it is in fact somewhat surprising the minimum requirements hasn't decreased on the federal level but increasingly employers want to e-file for security and other reasons).

More information:

Utah Publication 14 updated May 1, 2018
Utah State Tax Commission: Utah withholding taxes
Utah's Taxpayer Access Point (TAP)
IRS 2018 W-4 form


Oregon has a new transit tax that employers will have to start withholding in July

Effective July 1, 2018, Oregon employees (including the wages of nonresidents that perform services in Oregon) will be subject to a 0.1% tax.  This is a tax solely paid by employees but that employers are required to withhold and remit on a quarterly basis (and no matter how small that remittance might be).   While paid to the Oregon Department of Revenue (ODOR), payment of the tax requires two new quarterly forms (a summary sheet accompanied by a detail form similar to a state unemployment tax wage list) as well as an annual reconciliation form.

Advanced Accounting users should be able to easily accommodate this new requirement but should plan now as to which user-defined deduction to use for this purpose (in part because it is best to use the same user-defined deduction for the same purpose throughout a given calendar year).  The steps to set this up include:

(1)  Establish a new GL liability (type L) account in SY-E (Create/Chg G/L Accounts) in a range proximate existing liability accounts for payroll withholding accounts for FICA/Medicare, FIT, SIT, SUTA, etc.

(2)  Decide whether to use your existing vendor code for the ODOR which should be fine as long as the remitted tax is paid separately from other taxes, or establish a new one to be used solely for remittance of the tax.

(3)  In SY-D (Enter/Chg PR/GL Interface), decide which of the six numbered deductions* to use for this withholding tax, enter a short description such as TRANSIT TAX next to that dedcction, and then enter the liability account that you created in step 1 above.  Then:

  • Under Deduct Amounts enter the rate of:   0.0010 
  • This is NOT a pre-tax deduction so answer the next question accordingly.
  • Choose option 6 - % of Gross pay for the post-tax calculation method (Calc how will display 6). 
  • Enter the vendor code (press F2 or click on F2 Display Vendors) that you decided to use in step 2 above.


Press F10 or click on the F10 Save button to save.   Repeat for each of your active payroll divisions.

*While we would normally recommend use of one of the six user-defined deductions, if all of those are in active use, there is another albeit less desirable option.  In addition to the six user-defined deductions, Advanced Accounting has at least four other possibilities.  Two of those however do not provide any automatic calculation capabilies ("Misc" and "Special") so they would also not be desirable. Workers compensation employee withholding fields could be used but each employee record would have to contain the appropriate rate and that would also obviate the possibility of using those fields for their intended WC purpose. However, an option that could work would be the SDI deduction.  SDI is normally only used in states that have a state disability insurance requirement (and there are very few of those, only five that we are aware of - one of which is California - and Oregon is not one of those states).  In Advanced Accounting, we have also co-opted SDI to handle, in part, COIT in Indiana but it could be used elsewhere for other types of employee only withholding involving a flat rate applied to gross wages (to handle certain city or municipality taxes, for example).

Confusingly an SDI "expense" column exists in the Advanced Accounting SY-D setup that goes back to very old versions of the software which implies that some expense account would be ultimately debited (which would not be appropriate for the transit tax withholding)  when processing payroll checks, but it appears that was something put into place for potential future implementation by the original developer and not actually ever implemented, so only the GL liability code comes into play. 

When using SDI for an additional deduction, some unobvious issues must be dealt with.   SDI deductions have to be "enabled" at the employee level (PR-A).  To use SDI as an additional deduction of some kind, you would have to change the "SDI" flag for each employee in PR-A from the default of "Y" (which normally means exempt from SDI) to "N."

Then you would still set up a new liability code (as in step 1 above), decide on which vendor to code use (as in step 2) and in SY-D connect the new liability code in the liability GL code column, and in order to get access to the vendor code currently the program requires that some valid GL expense code be entered (since it is never used, we will change the way this behaves in future releases).

Next, for each division you would in the PgDn Rates section of SY-D enter the rate next to State Disability, but amounts there are input as percentages, so instead of 0.001 you would need to enter 0.10  (to indicate 0.1%) and under the limit input 999999 so that the Enter Pay Info option (PR-B) will attempt to compute the withholding amount on any/all wages (since in the case of this transit tax, there is no wage limit) and then save each of payroll divisions.

"SDI" amounts withheld can also be included in box 14 of W-2 forms and e-filings if desired (to communicate to each employee how much in transit taxes were withheld for the year).

More information:

Oregon new statewide transit tax
Oregon Quarterly Statewide Transit Tax Withholding Return
Statewide Transit Tax Employee Detail Report (quarterly form, accompanies the above form)















Saturday, March 24, 2018

Missouri, North Dakota, Oregon . . who's next?

Just in the past week or so, we've become aware of three more states that have made 2018 state income tax withholding changes:

Missouri:

Missouri was one of several states that initially deferred making any first of year changes for 2018. 

Missouri has since made sweeping changes without any accompanying explanation other than that the changes were made as a result of the federal tax reform bill signed on December 22, 2017.  The state further indicates that if the IRS makes additional calculation adjustments, more changes could follow.

Missouri essentially doubled standard deductions (four different types including a distinction for married individuals depending on whether the spouse works or not; only one other state to our knowledge makes that distinction) but also completely eliminated any deduction for personal allowances.  They also lowered the top incremental rate from 6.0% to 5.9%.  In one sense this is logical if a state's view is to mimick what the federal system does and is trying follow what the law says (since personal exemptions are going to be eliminated at the federal level), yet it also really doesn't (since the federal withholding formula is still taking them into account).   What it basically means is that now in Missouri, and unlike the federal withholding tax logic, additional allowances basically mean nothing in that the state withholding tax calculations are essentially identical regardless of the number of allowances claimed.  So if you analyze some of the tax tables the state has now published, the difference in tax calculations for Single, Married (see more below) or Head of Household, whether an employee claims 0 exemptions or 10 exemptions, the withholding amounts are all almost exactly the same.  This is a result that normally would be completely unexpected for any state where employees can claim state withholding allowances, and is therefore somewhat unprecedented.

Missouri's updated MO W-4 form (some states have their own withholding form, some just use the federal form) still asks for the number of additional allowances for dependents and a separate line for other allowances.   But it appears that those answers mean very little in terms of MO withholding calculations.

With respect to the two Missouri "married" types:  if both spouses work, the status in Advanced Accounting should be identified as a "B" versus an "M" if the spouse does not work.  There are big differences in the calculation between MO state income tax withholding for a "B" status as compared to an "M" status, although the calculation is of course identical for federal income taxes (where a "B" simply becomes an "M").  It is on line 2 of the MO W-4 where an employee indicates whether a spouse works or not.  But it asks the employee to enter a "1" if a spouse does not work as if it is an allowance.  That really doesn't make any sense because the critical distinction for the two types has nothing to do with "allowances" per se, but rather puts the employee into an entirely different category.

Advanced Accounting has been updated internally both for the significant logic and other changes along with an accompanying tax table update that is also required.   Missouri payroll users will need to contact us to obtain this update.

Missouri has a fairly helpful on-line withholding tax calculator that we wish all states had, and their web site indicates that it has been updated for these recent changes.  We have used it fairly extensively to test changes we made in Advanced Accounting to ensure that our computations were matching theirs.  Something that is odd about the calculator, however, is that it asks for the computed federal income tax withholding (FIT).   Yet the Missouri formula in effect does not consider FIT, and we have found we can input almost any value in the calculator for the federal tax amount and it usually makes little to no difference in their calculation, which is very confusing.

MO employer reference page: http://dor.mo.gov/business/withhold/

North Dakota:

North Dakota on Jannary 3, 2018 had indicated that it was going to delay releasing its 2018 income tax withholding, and it put out that notice since it is a state that normally publishes changes every year.  At some point after the release of the updated IRS Publication 15 aka Circular E (which came out on January 25), North Dakota revised their rates which also included a revision of their supplemental wage rate (involves some internal logic, not a table change).  North Dakota's logic is fairly simple.  They are one of many states that still have a standard deduction similar to the federal amount which was raised, accompanied by some tax table changes.  Advanced Accounting users in North Dakota will need an update from us to handle two of these changes even though the biggest changes relate to user maintainable table limits/rates.

ND employer reference pagge:
https://www.nd.gov/tax/user/businesses/formspublications/income-tax-withholding/guidelines--publications


Oregon:

Oregon was off the radar in terms of making 2018 changes, but made changes effective February 1, 2018.

Oregon has one of the more complex and difficult to follow formulas which is really very much unlike any in the country (although there are some other states that fall into this category as well), and there are many inconsistencies in the explanation of the formula.   Since we have long supported the Oregon formula in Advanced Accounting, the changes should have been fairly easy to implement, even though there were a great number of changes to rates and amounts.

We realized however in trying to test withholding amounts that despite having spent a significant amount of time trying to implement the formula in the past and despite how the Oregon instructions are presented, a single employee with 3 or more allowances receive the same base and other logic "as if" married.   No other state has logic like this that we are aware of, and this came out in testing.  After making preliminary changes, we were getting the same results as some of Oregon's tables for a status of Single or Married with 0, 1 or 2 allowances (which all produce different, matching results as expected).  But for 3 or more, the distinction supposedly goes away (but yet it doesn't).  And Oregon's published tax tables reinforce that concept by having an unusual presentation for 3 to 14 allowances, with the amounts in those pre-calculated tables shown as the same for single or married.  BUT:  the Oregon formula specifically includes consideration of the FIT computed for a given pay period.   And the federal calculation continues to be DIFFERENT for employees with a status of Single versus Married and has no concept like Oregon's in that respect. Therefore, the pre-calculated amounts cannot possibly be the same for a Single status with 3 or more allowances as someone with a Married status with 3 or more allowances, contrary to how they are portrayed in the tax tables. The "computer formula" that Oregon outlines should resolve that problem as most Oregon employers are probably not manually still looking up withholding amounts from tables.  But this causes considerable confusion in trying to interpret the formula that is presented and verifying results, which is already far more complicated than it needs to be.

The Oregon withholding amounts are completely logic driven and do not, and really cannot, easily rely on normal withholding tables which is why there are no "OR" tax tables under Advanced Accounting's PR-K "Maintain tax tables" option. 

A 2018 payroll update for Advanced Accounting is available for Oregon, and Oregon users will need to get in touch with us to obtain that update.

OR employer reference page:
http://www.oregon.gov/DOR/programs/businesses/Pages/payroll-updates.aspx


Comments:  

A state like Mississippi has not made any 2018 changes because their withholding formula doesn't rely on a federal income tax computation.  Nor does Montana, and others.   Utah would be another example where rates have not changed (since 2008) except for one big glaring discrepancy:  Utah's actual individual income tax filing, but not withholding, includes an adjustment for federal income tax paid during the year.   So unless it makes some changes, they will be discrepancies in amounts withheld compared to amounts owed (more so than normal) in 2018.

Unless it is required by a state's statute (although statutes can be changed), is nonsensical for states to include in their withholding formulas any amount that relates to the federal income tax.   Why? These are completely unrelated and disparate systems.  Surely state legislators and tax commissions, in those states which have state income tax (and most do), could easily come up with formulas based on projected/needed revenues that do not in any way need to rely on, nor include consideration of, projected nor actual federal individual income tax amounts. These are archaic approaches that need to be changed not only to simplify calculations that will still lead to the same tax payments/revenue but would avoid the needless chaos, confusion, and cost that arises just because of back and forth swings in federal income tax calculations.  This is not a state vs. federal issue, simply that the two taxes are completely separate and unrelated, and one should not in any way rely on the other.  The elimination of any reliance on federal changes includes both (a) standard deduction amounts (many states still use an amount that parallels the federal amount) and (b) federal income tax calculation/projections. 

Why put your state into the position of having to revise your formulas every year just because of some federal change?  









Thursday, March 8, 2018

Louisiana releases updated withholding tables

On Feburary 15, 2018, the Louisiana Department of Revenue (LDR) announced updated tax tables and formulas that were effective February 16, 2018.   The changes were made to make adjustments in light of changes in federal income tax laws that will impact 2018 income tax returns.

Louisiana's withholding methodology is unique and, like a number of states that have state income tax withholding (most do), it requires special programming logic.

In reviewing our existing Louisiana state income tax logic, we realized that it needed to be completely changed to not only correctly accommodate the recent changes but also to more accurately compute the required withholding.

A description of the logic taken from the recently published tables is contained below:


A link to the full 2018 LDR document is referenced below:


Unlike withholding at the federal level and most other states (although there are exceptions), Louisiana separates dependency "credits" from "personal exemptions."  In most states, there is a single number for state allowances ("or exemptions") and often the number claimed by employees is the same as the federal amount.  Those allowances are usually indicated under "St" in the Advanced Accounting PR-A employee maintenance screen.



For Lousiana however the "St" value will now be used only for dependency credits. This is the number contained on Block B of Louisiana form R-4.   This is the number of dependents (as defined by IRS code) the employee will be claiming on their Louisiana tax return other than the employee or a spouse.  Personal exemptions should be entered under SSEx with these possible values:  0-none 1-employee 2-employee and spouse (i.e. the Block A value on form R-4). A value of 2 can only be entered as a personal exemption if the employee's marital status is "M" (married); a single employee can only claim 0 or 1.    A married employee can also claim 0 or 1, but one of the unusual aspects of the LDR logic is that in that event, the state income tax logic reverts to being the same as if a single employee.  

The 0 or 1 personal exemption election falls then into a different logic flow than a claim of 2 personal exemptions.    If the employee claims no personal exemptions but does claim dependency credits, the LDR's tax tables do not provide guidance as to the amount to withhold, but Advanced Accounting will nonetheless calculate the tax based on the formula logic.   Each additional state withholding allowance reduces, on an annualized basis, the tax withheld by $21. The selection of a personal exemption of 1 or 2 however then starts the calculation at a lower level, with some different rates and tax bracket logic applying to different wage bracket tiers.

In order to verify that the rewritten logic implemented in Advanced Accounting's PR-B was accurate, we had to modify the FIT/SIT calculator recently introduced in the software to take into account the separation of the dependency credits from the personal exemptions as outlined below.



In order to compare the withholding formula results to the tax tables provided by LDR, use the wages in any given bracket that is the average of the min. and max. values.  So for the bracket 18,501 to 18,900, in the calculator use 18,700.  For an employee claiming no personal exemptions (regardless then of marital status) and no dependency credits (i.e. state allowances on the screen above), the Louisiana state income tax is $504.30 (annualized) which exactly matches the table amount for that bracket. Changing the personal exemption to 1 reduces the calculation to $409.80.  Adding one state allowance (dependency credit) results in a value $21 less or $388.80. Changing the marital status to M and claiming 2 personal exemptions and no state allowances results in a calculation of $222.40.  Adding a dependency credit reduces that amount by $21 to $201.40.

We have further tested the updated program using salaries in all ranges that the LDR tax logic impacts, and with both 0, 1 and 2 personal exemptions in those ranges to verify accuracy.

A software update for Louisiana users is now available which includes an update to both Advanced Accounting's PR-A and PR-B program options.  Existing users will, after installing the new update, need to check each employee to ensure that the "St" value now only contains values representing Block B elections and the Block A election amounts are moved to the SSEx field for employees who belong to a division with a state code of LA.

In states like Louisiana where different types of allowances or exemptions may apply, this means that both the state L-4 and the federal W-4 will need to be completed by employees.  And since the recent federal tax law changes have eliminated personal exemptions, confusion and questions will likely follow.











   










Wednesday, February 28, 2018

Why it isn't just about the browser

There is a lot of confusion about terms such as "cloud-based" and "web-based" software.

Most users probably are thinking of a web browser when they think of these terms.   Even the term "tech" in the software industry tends to be linked to some product or service that involves a web browser.  Misguided approaches that focus on teaching children how to be "coders" often translates really to "how to format and upload a web page" with a few added scripts sprinkled in for good measure, which is really more "formatting" then programming, and in any event tends to focus on processes and tools that "live" solely within the constraints of a web browser. 


(Children should be taught how to read books, how to think and interact with others, how to do things with their hands, how to play a musical instrument, how to hold a pencil and write with it, how to spell, how to use mathematical principles in their daily lives, how to appreciate and care for the natural world, etc. long before any consideration towards using a computer much less than "coding" which should not be thought of as anything ultimately other than a tool to enhance other endeavors and knowledge, and not as an end in and of itself.)

While the definitions depend on who you ask, a web-based application is not necessarily accessed via a web browser (although in most cases, perhaps).

And cloud-based applications aren't necessarily accessed through a web browser either. In fact, very often they are not.

And "clouds" might be privately hosted (which further blurs the distinction of what has been commonly referred to as a locally run application or in more recent jargon, "on premises" application). A public cloud is hosted by a third party such as Microsoft Azure or Amazon Web Services but there are companies now that will host your private cloud which blurs the distinction even more.

The browser remains a relatively poor substitute for programmatic control and validation; and integrated development environments (IDE's) are still light years behind what has been available for the desktop PC now for decades.

Most companies are using at least some Internet or web services and in this respect we have been living in a hybrid world for some time as personal computers morphed into performing a number of chores for which they were not originally designed (they were not designed at first even to network to each other locally, much less to far off destinations).  They were after all "personal" computers. Whether the programs reside on a computer that you own and maintain or whether it is on a computer that someone else owns and maintains is increasingly becoming a meaningless distinction.  Either system could involve accessing programs "from the cloud." A more critical distinction might be whether an application requires a web browser to access it, and also relating to the transportability of that system (can you only access it from the provider's computers, or do you have the ability to run it from a backup copy or a copy placed somewhere else)?

Increasingly users are opting for software that they don't even have the ability to run anywhere but from the provider's publicly hosted computers. In some sense this is like always always being forced to drive someone else's custom built car as your sole source of transportation (and each time having to ask to borrow the keys to use it).  There can be advantages in that approach, but also disadvantages.

For many companies concerned with security and the flexibility, the hybrid approach to both local and sometimes occasional access to external resources using a web browser will remain a preferred way of doing business.

Some key considerations include:

(a) Within 18 months, will you have paid more in monthly fees than you could have paid to have access to your own licensed copy of the software, regardless of whether you are continuing to pay a monthly fee or not?

(b) Will all of these monthly fees that you start to pay for anything and everything in fact start to pile up and break the bank despite the allure of nothing up front?

(c) Do you really have incredibly good and constant raw Internet access from all your PC's and from all locations?

(d) If you temporarily do not have Internet access or if the provider who is hosting your application has a problem with a server that goes down, what then?

(e) Even if you have a copy of your data, how would you access that data if the provider goes out of business, or denies access due to non-payment (or due to an accounting error on their part)?

(f) If a software company is advertising their wares as being completely browser-based, are they really? Many things simply can't be accomplished by a web browser and will require the installation of local components. The statement many companies make that their software is "all web-based" (with again the problem of what 'web-based' means) and that no locally installed software is required is often really not true.

(g) Browser incompatibilities are ongoing, rampant problems. Maintaining cross-browser compatibility is a nightmare. You may be forced to use a particular browser and a browser update could at any time "break" the system. Using a web browser doesn't increase reliability/stability nor shield one from problems of future updates.

(h) The devastating malware and other threats that are out there are not somehow removed by using cloud-based systems - in fact in some ways they are even greater. Many of our customers are justified in not putting their accounting systems "on-line" i.e. available from outside of their wired, local network system. In terms of threats from the outside world, there is no better security (other than not turning your computer on at all!) than making them unavailable from outside, "Internet" access. And yes that may be far too dire of solution for many depending on the business and its needs, but it is a decision based on the reality of today's world.  It is through browsers or browser-based systems, that users often are at the greatest security risk (in addition to locally installed software that brings in e-mail with potentially lethal attachments, all via Internet access).


A web browser is great for being able to interactively and quickly view documents and images from more or less anywhere (although this can also be accomplished without a web browser); it is less than ideal for heavy data input nor validating that input nor for complicated reporting and related data analysis nor necessarily handling the needs of complex, integrated multi-user systems.

Browser-based capabilities continue to greatly improve and most of us will continue to use those resources to access information and communicate with others. But they are in no way the "one" piece of software that is required.  They are not effective "runtime environments" that were designed to be universal in scope, and they lack the power and capabilities of true programming languages that were designed to run programs at a machine language level on today's computers as well as all connected devices.  It was no one's intention to some day do everything from a web browser. To do that will require something much better than what we have today, and will involve some thinking outside of  the browser box.

Meanwhile, we believe that hybrid systems (locally run programs with the capability to access certain Internet services as required) will continue to prove to be very attractive for many businesses, both small and large, or in combination with browser-based systems that are designed to interface with desktop, i.e. local, systems.

Sunday, January 28, 2018

Impact of 2018 federal income tax withholding tables: what will they mean for your employees?

Starting by February 15, U.S. businesses should be implementing the new federal income tax withholding tables while continuing to use the 2017 tables for January (see our January 11, 2018 blog post for more information).

Accordingly, a payroll update for 2018 for Advanced Accounting users is now available. Our 2018 update is now available that includes implementation of the new federal tax tables discussed below plus changes for about 10 states along with the new federal supplemental wage rate, some 941 related changes, and a new payroll tax calculator option.  

More information:  Advanced Accounting year end and latest payroll information

Because several of our accounting software end users attempted to initially implement the tables prior to our releasing an update for them (Advanced Accounting has the ability to enter federal and state tax table changes directly, although typically there may be other computational changes that require an update for certain states), prior to releasing our 2018 payroll tax update, we decided that because of reported difficulties two users had plus in light of all of the publicity surrounding the new rate changes, it would be prudent to analyze what the changes actually can be expected to mean, and to also determine the relative impacts of martial status and dependents with respect to a range of wage amounts.

Our analysis (embedded below; an external link to the document is contained below the embed) focused on monthly wage amounts simply because most household budgets are month oriented.  The monthly wages assume that they are net taxable wages.  We then made a comparison of what the monthly withholding amounts were for the same wage and marital status for a range of monthly wages with withholding allowances ranging from zero to four.   We then computed the monthly increase and the percent reduction in comparing 2018 to 2017.   And we then also took an average increase and percent reduction for wages in the $2000/mo. to $7000/mo. range for each marital status and exemption combination.   All withholding calculations were made by Advanced Accounting's payroll tax calculator.

Results:  employees will see a fairly significant reduction in their federal income tax withholding once the new tables are implemented.   For employees in the $2K to $7K range, the reduction will be typically in the roughly 18% range in most cases.

While the percentage reductions are fairly consistent across most wage limits and regardless of marital status, Single status results in higher monthly savings (on average in the $35 to $40 month range for the $2K to $7K ranges) because of the higher withholding amounts assessed to employees with that status.


We noticed some odd/inconsistent results in comparing Single status withholding differences in higher monthly income ranges (i.e. with nominal differences compared to all others analyzed).



2017 to 2018 FIT comparison document link 


Commentary:  the new tables use the same sort of withholding allowance logic as in the past.  Yet personal exemptions have been eliminated for year end individual federal income tax filings.  More changes may be coming as the year proceeds and we would advise all employees to review their tax withholding status by the end of the third quarter of this year to see how close the new withholding will be approximating their tax liability.  Many states have made changes and more will likely do so.   Some states that have not made changes are realizing that the change while not impacting current withholding tax logic will in fact change individual tax liability for year end filings, causing more taxes to be payable than last year (Utah is one example) or there may be some where the reverse could be true.
















Thursday, January 11, 2018

2018 early release notice 1036

An early release notice was published by the IRS on January 9, 2018 providing an initial look at the upcoming federal income tax withholding rate changes.

Notice 1036: Early Release Copies of the 2018 Percentage Method Tables for Income Tax Withholding

These are not the official tax tables.  Publication 15/Circular E has not yet been released.

In a related updated 2018 statement, the IRS has indicated that:

Employers should begin using the 2018 withholding tables as soon as possible, but not later than Feb. 15, 2018. They should continue to use the 2017 withholding tables until implementing the 2018 withholding tables.

Some initial changes besides those outlined in a prior recent blog post include:

The annualized withholding allowance is now $4,150 (it was $4,050). This corresponds to the Advanced Accounting US0 tax code that users will need to update in due course.

The supplemental wage withholding is now 22% (was 25%). This is the first year that rate has changed in quite some time. This change is not end user configurable but will be available in our 2018 payroll updates that will be released later this month as the dust continues to settle.

Comments:

A curious aspect of these tables relate to withholding allowances.  Since personal exemptions have been eliminated, why then are there still withholding allowances?

While we have not yet seen a specific answer to this question, because the IRS wanted to allow employers to continue to use existing W-4 forms and due to the last minute nature of the new law, the rate calculations are presumably attempting to take the elimination of personal exemptions somehow into account.  It is hard to see however how well that will work by year's end, at least for some employees.

Other miscellany:

A new form W-4 will ultimately be forthcoming but existing W-4 forms can continue to be used.

Yesterday we made some changes to the 941 worksheet option to synchronize it with the numbered lines on the IRS 941 form including the currently released draft form for 2018.  That update will be included in the payroll updates to be released later this month for Advanced Accounting.