ACA Update Affects QuickBooks Users

By January 21, 2014 Businesses, Individuals

The recent ACA update is poised to affect QuickBooks users in several ways. If you are one of many QuickBooks users who runs payroll through QuickBooks, there are some additional steps you may need to take to ensure your payroll is operating correctly.  First, some background:

The Affordable Care Act (ACA), also known as Obamacare, added an additional Medicare tax on Net Investment Income and income subject to FICA or Self-Employment tax.  This tax comes in the form of a 3.8% surtax on Net Investment Income or an additional payroll tax of .9% when you reach $200,000 ($250,000 for MFJ) in salary.  QuickBooks has a payroll item for this, but it DOES NOT automatically setup when you update your tax tables.  As a result, someone taking a salary of more than $200,000 could end up owing additional taxes at the end of the year.

The fix in QuickBooks is two steps.  The first step is to go to Employees > Payroll Setup and open then close the setup.  This simple step will let QuickBooks create the item.  The second step is to go to employees this may apply to and make sure they have this payroll item in their individual setup.  QuickBooks will not automatically assign this item to an employee when they cross the wage threshold.  For more information, you can find instructions from Intuit here and specific information on setting up each employee here.

Intuit has this information available through their website and technical articles, however they did not send these instructions with the tax table updates.  ACA is still a relatively new law and remedies are available to fix this issue if it was not set up properly for 2013.  For more complex payroll situations, I generally recommend working with a dedicated payroll service to ensure compliance rather than trying to do it yourself.   We can help you fix payroll errors, keep your QuickBooks in good running order, and connect you with outsourced payroll professionals who can help you avoid software headaches.