Congressional dithering messes with payroll systems

Playing payroll tax roulette

Excerpt:

For payroll processors, the two-month option because of the $18,350 cap is the toughest to implement. Not impossible, just more complicated and costly to set up quickly, executives from the American Payroll Association and the National Payroll Reporting Consortium told CNNMoney.

Many payroll systems may not be able to make all the needed changes in January, the NPRC believes. And some may even struggle to get the job done by February.

There are two reasons why: The first pertains to high-income workers -- those who earn more than $110,100 a year. Since many of them will earn more than $18,350 in the first two months of the year, payroll systems will need to be programmed to withhold their Social Security taxes first at 4.2%, then at 6.2% for earnings above the $18,350 limit.

The second reason concerns the quarterly forms that payroll processors have to fill out for the IRS. A quarter is three months, but the extension would be for two months. So those forms would need to be redesigned and the systems would need to be programmed to reflect those adjustments. If all that can't be done by March 31, companies may later have to amend their returns.

Comment: Not sure whom to blame but I feel the President has not provided leadership on this