How to correct withholding due to changes in number of pay periods per year
An employee's number of times paid has changed and it does not appear that the correct tax withholding is calculated. For example, the employee had been paid monthly, then they changed to bi-monthly.
The Pay Group the employee belongs to defines how the system estimates annual gross pay to calculate withholding taxes.
Example 1: If an employee is in a Pay Group with 12 pays per year and they earn $1000 per pay, the system estimates their annual gross pay to be $12,000 and calculates taxes based upon the $12,000 amount.
Example 2: If you change the employee's Pay Group to a bi-monthly group and paid them $1,000 (ONLY once a month) the software would estimate their annual gross pay as $24,000 and calculate taxes based upon $24,000, even though you are only paying the employee $12,000 per year.
Pay Groups can be found in Payroll → Setup → Pay Group Information
You can find the Employee's Pay Group on the Employee Information Screen in the Pay Data tab.