Payroll Compliance Guide - Taxes, Laws, and More

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PayrollServicesQuote.com to Choosing the Right Payroll Service Provider
The Definitive Guide

The Definitive Guide to Choosing the Right
Payroll Service Provider

Payroll Compliance Guide
Taxes, Laws, & More
10 Tips To Save You
Time & Money

PayrollServicesQuote.com

In This Guide You Will Learn
 How to Avoid Costly Fines
 Who Needs an EIN
 A Common Unknown About Long-Term
Disability
 Why it’s Important to Correctly Classify
Workers
 What Single Misstep Can Initiate a Full
Federal Audit

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Tax Agency Requirements
Tip No. 1
• Every business MUST have an ID.
• Sending returns without ID can result in
substantial delays.
• To obtain more information or start the process of
obtaining an ID visit
http://www.irs.gov/businesses/small/article/0,,id
=98350,00.html
• States require a unique ID number for the same
reasons. For state information visit
http://www.irs.gov/businesses/small/article/0,,id
=99021,00.html



Social Security
Tip No. 2
• Responsibility for paying SS tax is split
50/50 between employer & employee.
• In 2010, tax rate was 12.4%, in 2011 only,
the employee share will be reduced to
4.2%.
• Employers must include accurate &
complete employee names & SS no. on
W-2 forms to avoid rejection & potential
penalties.



Garnishment & Child Support
Tip No. 3
• Title III of the Consumer Credit Protection
Act prohibits and employer from
discharging employees because their
earnings have been subject to
garnishment.
• Employers must always include the
employee case no. with garnishment
payments.
• Employers must be mindful of federal &
state new-hire requirements.



Third-Party Sick Pay
Tip No. 4
• Even though an employee on long-
term disability is receiving salary
payments from a 3rd party insurance
provider employers must still fulfill tax-
filing requirements on the employee’s
wages.
• More info can be found in IRS
publication 15-A, Employers
Supplemental Tax Guide.



Fringe Benefits
Tip No. 5
• Employers must identify & report
fringe benefits correctly although they
are easily disregarded as incidental
events.
• The IRS looks closely at how employers
interpret this type of compensation.
• See IRS publication 15-B (2011),
Employer’s Tax Guide to Fringe
Benefits.



Employee vs. 1099 Contractor
Tip No. 6
• Proper classification may save a company money & benefits,
such as pension, group health, and workers’ comp insurance, as
well as social security & unemployment insurance taxes.
• In most cases, the only tax form employers need to complete is a
1099 at end of year for contractors.
• Classifying workers as employees requires the co. to withhold
federal, state, and local income taxes, pay ½ the tax mandated
under FICA for SS & Medicare, pay the full tax under the FUCA &
any state unemployment insurance tax laws; pay for workers
comp, file a no. of returns during the year & provide W-2s by Jan
31.
• For more info visit
www.irs.gov/businesses/small/article/0,,id=99921,00.html



Exempt vs. Non-Exempt
Tip No. 7
• Employees with exempt status are
exempt from some of the provisions of
the federal wage & hour law.
• Disclosure of a single classification
issue can often trigger a full wage &
hours audit that can lead to an
unplanned financial burden.
• Employers must be careful to not
stretch the rules of classification.



Over-Time Rules
Tip No. 8
• An employer that requires or permits a non-exempt
employee to work over-time is required to
compensate the employee with the appropriate
premium pay.
• Employees covered by the FLSA must receive
overtime pay for hours worked in excess of 40 hrs in
a work week of at least 1 ½ times their regular pay
rate.
• Premium pay for working weekends or nights is a
matter of agreement between the employer &
employee.
• A single misstep can initiate a full federal audit



Group Term Life Insurance
Tip No. 9
• The cost of the 1st $50,000 of group term
life insurance premiums is tax free to
employees & deductible for employers.
• Employers should not waste time at year
end dealing with last minute GTL
computations.
• Best strategy is to calculate & withhold
throughout the year rather than waiting
until the calendar deadline.



Tax Deposits
Tip No. 10
• Warning – Penalties can add up
when the IRS finds missed payments
in the look-back period.
• Simple Solution – Pay your tax
liability on time!



Summary
• Employers owe it to themselves to be
well versed in payroll tax,
employment, and benefit guidelines.
• Complying with state & federal
statutes is the 1st step in avoiding
costly penalties.
• A squeaky clean record reinforces your
reputation!



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Payroll Compliance Guide - Taxes, Laws, and More

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