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Monday, April 21, 2014

New Wisconsin state withholding tax rates as of April 1, 2014

The state of Wisconsin implemented new state income tax withholding tax tables and rates to be implemented on/after April 1, 2014.

As is often the case, a change in a state's withholding tax rates often does not require an Advanced Accounting software update due to the ability of the end user to maintain standardized tables, particularly when a state follows an approach similar to that of the Internal Revenue Service's annualized rates and related formula structure.

Wisconsin is somewhat unique in providing two alternative annualized methods, referred to as Method A and Method B. The rates computed by these methods produce similar, but not exactly the same, withholding amounts. These calculations in turn will not exactly match, but will be close, to amounts listed in withholding tables for manual look-up.

Since at least 1988, Advanced Accounting has used Wisconsin's Method B approach since it most closely approximates the typical annualized schedule logic. And, as is also typical, there is a separate rate withholding schedule for employees that have a withholding status of “Single” versus “Married.”

The only piece of hard coded programming logic in Wisconsin’s formula involves a $22 amount per state exemption claimed that is deducted from the amounts computed by the standardized annualized tables (after which the calculated amount based on previously annualized wages is then de-annualized based on the number of days in the current pay period). We could also make that an end user managed value, but this $22 amount has been the same since at least 2004.

We also could have just as easily (and in fact initially did) use Method A to meet the April 1, 2014 changes for Wisconsin, but it would have involved using more internally hard coded logic compared to Method B, and would therefore make the system less flexible for future changes. So we have reverted those changes to again rely on a Method B withholding schedule structure.

Advanced Accounting users that have employees that are subject to Wisconsin state income tax withholding therefore only need to update the WIS (Wisconsin Single) and WIM (Wisconsin Married) tax codes in payroll (PR) module option K (Maintain Tax Tables) as outlined on page 45 of the Wisconsin Withholding Tax Guide Effective for Withholding Periods Beginning On or After April 1, 2014, Publication W-166 (1/14). 

For end user convenience, a link to a PDF that shows what these should look like from within the Advanced Accounting software is contained below.

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