How To Set Up a 401K Deduction


How To Set Up a 401K Deduction 

Use the Deduction Setup window to enter and maintain company deduction records such as a 401(k) deduction. 

The records you enter using this window will be used as the basis for setting up employee deductions. After the deduction is set up, you'll need to assign it to the appropriate employees and make any necessary modifications using the Employee Deduction Maintenance window Cards | Payroll | Deduction . 

1. From the Setup menu, choose Payroll | Deduction. 

2. In the Deduction Setup window, enter a code - such as 401(k) - and a description to identify the deduction. 

3. Enter the starting and ending dates for the deduction. 

 Start Date - The start date is the date on which the deduction takes effect. This date should be on or before the ending date of the pay period you want the first 401(k) deduction to be made. Otherwise, the deduction won't be calculated. 

 End Date - The ending date is the date the deduction should end. If it is a continuous deduction, leave this field blank. 

4. Mark Variable if the deduction is to have a different amount for each pay run. If you mark this box, you'll need to enter a transaction for the deduction for each pay run that the deduction is taken. 

5. Select a frequency to annualize employee deductions for tax calculation purposes. The frequency you enter should match the frequency that will be used for the pay run that includes this deduction. 

6. Enter pay code information. You can base the 401(k) deduction on all pay codes or on a selected group of pay codes. 

7. Select one of the following methods for calculating the 401(k) deduction: 

Percent Of Gross Wages - Select this method if you want to calculate the deduction as a percentage of total wages before taxes are deducted. 

Percent Of Net Wages - Select this method if you want to calculate the deduction as a percentage of wages after taxes are deducted. 

Fixed Amount - Select this method if a fixed amount should be deducted from the employees wages. 

Amount Per Unit - Select this method if the deduction should be based on hours or units using piecework, hourly or overtime pay. 

8. Select either a single tier or multiple tiers on which the deduction amount per pay period should be calculated. 

Single - If you select Single, enter an amount or percentage. 

Multiple - If you select Multiple, choose the Tiers button and the Tiered Deduction Setup window will open, where you can enter tiers for the deduction. Use multiple tiers if the deduction percentage or amount is determined by the wages earned, hours worked or units completed. For more information, see Calculating tiered deductions in Dynamics on-line help. 

9. Mark the taxes from which the deduction is sheltered. Taxable wages will be reduced by the amount of the tax-sheltered deduction before taxes are calculated. If Federal Tax is marked, the amount of the deduction won't be included in gross wages on the employee's W-2 form. 

10. Enter the maximum amount that can be deducted for each employee for each pay period, year, or lifetime. For example, if a 401(k) deduction for a single pay period shouldn't exceed $100, enter $100 in the Pay Period field. These fields can be left blank if a maximum amount isn't applicable. 

11. If the deduction amount needs to be printed in a special box on the W-2 statement, enter the number of the W-2 statement box in which the amount should appear. 

12. If the deduction amount must be printed on the W-2 statement and you are required to enter a label, type the label you want to appear. See IRS rules for the applicable year for a current list of labels. 

13. Assign the 401(k) deduction to the appropriate employees and make any necessary modifications using the Employee Deduction Maintenance window. 

This article was TechKnowledge Document ID: 3266


Article ID: 861317 - Last Review: Feb 14, 2017 - Revision: 1

Microsoft Dynamics GP 9.0, Microsoft Dynamics GP 10.0, Microsoft Dynamics GP 2010, Microsoft Dynamics GP 2013, Microsoft Dynamics GP 2015, Microsoft Dynamics GP 2016, Payroll - U.S, Payroll