ACS reports on their blog that Congress is considering a major one-year tax cut that would reduce the employee FICA tax from 6.2% to 4.2%. If you’re not already doing so, it may be wise to reconfigure your numbers with a withholding calculator just to make sure. The problem is that Payroll modules for nearly all Church management systems assume a 6.2% rate for employers. A major factor in this issue is that Payroll must be processed in a fairly tight timeframe (early 2011), and delays could prevent churches from paying their employees for a period of time.
From ACS:
The ACS Payroll module is set up to handle calculations for FICS, Federal, and State taxes via a set of tax tables. This approach lets us easily make the normal annual adjustment, like raising the percentage ranges or FICA maximums, to the tax tables which can be loaded with any recent version of the software. However, if the government changes the percentage used for the employee FICA to 4.2% and leave the Employer FICA percentage at 6.2%, I believe that ACS like most all other software developers will have to change the actual program to reflect this tax break.
It’s important to note that these changes will only affect you if the bill is passed, as it remains in Congress at the moment. Regardless, Payroll is ordinarily a major ordeal for a church finance office and needs to run smoothly. Be sure to let your administrator know that the changes are proposed, and to coordinate with your ChCMS provider to make sure taxes are handled appropriately.
Thanks to the people at ACS for the heads up.
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