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Monday, December 28, 2020

Payroll tax withholding for 2021

Federal withholding tax changes for 2021:

The IRS released tax tables for 2021 on December 8, 2020 (Publication 15-T).  Compared to the changes implemented in January of 2020 (see 2020 federal payroll changes create confusion), the 2021 changes will be easier to implement since they build on the changes made last year.  There is also an updated W-4 form for 2021 which appears to be exactly the same as its 2020 counterpart.

As of today and for businesses that have already processed their last paychecks for 2020, updated tax tables are available for Advanced Accounting 8 which includes our normal annual payroll update which checks all payroll divisions for the latest social security limit maximum, which for 2021 has increased from $137,700 to $142,800 (see the SSA's COLA information page).  

Versions prior to Advanced Accounting 8 are not compliant with the latest federal withholding logic for the reasons indicated in our February 2020 blog.

All of the federal ("US") tax codes have been updated including the new codes added last year i.e.:

Legacy tax codes (employees still using a pre-2020 W-4 form):  USS, USM and USH.

New tax codes (2020 or 2021 W-4 form):  UST, USN and USI.

We have tested all of these codes with the updated tax table, and they appear to all be working as expected.

Note that while employees are not required to submit new W-4 forms each year, if an employee wants to make any changes to their withholding or is first hired on/after January 1, 2020, they must use the newer W-4 form.

State withholding tax changes:

We also anticipate logic and/or table changes for at least 14 states.  So far we have already made updates for California, Michigan, Oregon and South Carolina with more to follow.

No W-3/W-2 form changes:

There are no required W-3/W-2 form changes for 2020.   W-3/W-2 forms can be obtained from any number of suppliers including the official forms supplier for Advanced Accounting, Dynamic Systems.  (Dynamic Systems also can provide the new form 1099-NEC and updated 1096 transmittal that replaces 1099-MISC handling for non-employee compensation.  We released an update for printing to that form in late March of this year as a part of Advanced Accounting 8 r3.) 

E-filing for 2020 is now also available:

We have re-tested and been approved by our e-filing partner to begin processing forms through our portal for federal/state e-filing of W-3/W-2 forms for 2020.  Filings can be initiated as early as this week if you have processed your final paychecks for 2020.  

February 1, 2021 is the deadline to file forms W-2/W3 with the SSA:

This due date is the same for all filings, i.e. whether paper or electronic.

How to obtain payroll tax updates for Advanced Accounting 8

Please contact us via or or call 1-800-648-6258.


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