Presentation Transcript

1. Payroll 101CPE Seminar

   Streamline. Connect. Reward. The ADP logo, ADP, TotalSource and Resource are registered trademarks of ADP, Inc. In the Business of Your Success is a service mark of ADP, Inc.
2. Agenda The Payroll Equation Earnings Deductions Taxes Tax Depositing and Filing ***What’s New***
3. Objectives & Agenda At the end of the session, participants should be able to: Present the payroll equation Identify types of payroll earnings and how they are taxed Distinguish between a voluntary and involuntary deduction List employee vs. employer taxes as well as corresponding tax forms and filing frequencies Determine when a company needs to make payroll tax deposits
4. What is the Payroll Equation? How Do You Arrive at Net Pay? Gross PayminusTaxesminusDeductionsequals Net Pay Examples Gross Pay - Taxes - Other Deductions = Net Pay Regular FIT 401k Check Overtime SS Medical 125 Direct Deposit Taxable Fringe Med Voluntary Cash Non-Taxable Fringe State Involuntary Payroll Cards
5. What are Examples of Gross Earnings? Regular Earnings: Salary or Hourly Overtime Vacation/Sick/Personal/Holiday Commission Shift Pay Taxable Fringe Benefits Bonus
6. Minimum Wage What is the current federal minimum wage? There may be times when there are conflicts between federal law, state law, and local law How do you know which one to use? $7.25 Very simple --- Whichever law benefits the employee Employer must pay an employee at least the greater of federal law or state law Example: FLSA Minimum Wage = $7.25 California Minimum Wage = $8.00 San Francisco Minimum Wage= $7.50 Which should you use?
7. Who is Eligible for Overtime? FLSA states that a non-exempt employee must receive overtime of at least one and one-half times their regular rate of pay for hours worked in excess of 40 within a workweek What makes an employee non-exempt vs. exempt? Non-exempt Salary is less than $455/week Job duties do not pass white collar test Paid hourly
8. What is the White Collar Test? Three Parts of Test: Salary-level: (amount the employee is paid) At least $455 per week Salary-basis: (how the employee is paid) Guaranteed salary for any week in which any work is performed Duties: (the work that is performed) Primary duty must meet specific criteria outlined within exemption
9. Primary Job Duties for White Collar Exemptions Executive A manager, someone who directs work of two or more workers, and/or has the ability to hire/fire Administrative Works in an office conducting non-manual work and exercises both discretion and independent judgment Professional Has primary duty work in advanced knowledge in the field of science/learning, and learned through specialized intellectual instruction OR performs Work requiring invention, imagination, originality, or talent in recognized field of artistic or creative endeavor Computer Professional Performs application of systems analysis techniques; design, development, testing or modification of computer; design, documentation, testing, or modification of computer programs related to machine operating systems; or a combination of the above and paid in accordance with the salary test or $27.63/hr or more Outside Sales Representative The salary test does not apply to this exemption. Duties include making sales; or obtaining orders or contracts for services or for the use of facilities. Must be customarily and regularly engaged away from the employer's place of business.
10. Employee vs. Independent Contractor
11. Employee vs. Independent Contractor
12. IRS Amnesty Program: The Voluntary Classification Settlement Program In 2011, the IRS launched the Voluntary Classification Settlement Program (“VCSP”), which encourages employers to voluntarily reclassify independent contractors as employees for federal employment tax purposes. The VCSP provides partial tax relief to eligible employers that have consistently treated workers as independent contractors and agree to treat the workers as employees going forward. The new Voluntary Classification Settlement Program is part of the IRS’s larger “Fresh Start” initiative to get more businesses and individual taxpayers into tax compliance and help close the tax gap.
13. IRS Amnesty Program: The Voluntary Classification Settlement Program Here are the eligibility requirements: To be eligible, an applicant must consistently have treated the workers in the past as nonemployees, have filed all of the required Forms 1099 for its workers for the previous three years, and not currently be under audit by the IRS, the Department of Labor, or a state agency concerning the classification of workers. Employers can apply for the new program by filing Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees. The potential relief afforded to employers includes: employers pay 10% of tax liability resulting from misclassification; not liable for penalties or interest for covered workers; not subject to an audit on payroll taxes for prior years. Note: The VCSP applies to federal employment taxes only; it does not relieve employer from obligations of FLSA, workers’ comp, and related laws.
14. Vacation & Sick Time Fixed Amount Examples: Allowed 40 hrs sick time as of Jan 1st Allowed 80 hrs vacation as of Jan 1st What are some pros and cons of this method? Accrued (Earned) Examples: Earn .77 hrs/pay period (.77x 52 = 40.00hrs/yr) Can only take what they earned What are some pros and cons of this method?
15. What Are Some Deductions From Pay? Voluntary Deductions or Assignments Pre & Post Tax Deductions Section 125 Benefit Deductions Deferred Comp. Plans (e.g.401k, 403b, etc.) Involuntary Deductions or Attachments Tax Levies Bankruptcy Garnishments Child Support
16. Examples of Pre-Tax Deductions Cafeteria Plans - Internal Revenue Code (IRC) Section 125 Deferred Compensation Plans IRC Sections - 401k, 403b (non-profits)
17. Qualified Pension Plan Contribution Limits
18. Which Taxes Are Affected?
19. How Do the Deductions Affect Wages?
20. How Do the Deductions Affect Wages?
21. How Do the Deductions Affect Wages?
22. How Do the Deductions Affect Wages? Decrease in taxable wages equal Increase in employees’ net pay & a Decrease in an employer’s tax liability.
23. How is Federal Income Tax Calculated? (insert a 2012 picture or take out) Methods of calculation: Wage Bracket Percentage Who issues these tax tables and where do you get them?
24. Social Security & Medicare (FICA) What are the current tax rates for 2012? What are the taxable wage limits? Social Security-EE 4.2% Social Security-ER 6.2% Medicare 1.45% Social Security $110,100 Medicare No Limit
25. What Are the State Payroll Taxes? State Income Tax (SIT) State Unemployment Tax (SUI) State Disability Tax (SDI) ***Know the taxes that apply to your specific state(s)
26. Where can you find out info about specific states www.accountant.adp.com
27. Agencies Affecting Payroll Internal Revenue Service (IRS) The IRS is the United States national tax collection agency Audits your clients on payroll and taxes U.S Department of Labor Provides employment information, statistics and data Maintains and enforces US labor laws and regulations, as well as compliance information Examples: Labor law posters and time and attendance
28. State Agencies State Agencies Department of Revenue: collects State Income Taxes Unemployment Division: manages and collects unemployment taxes and benefits Disability Division: oversees administration of disability benefits, where applicable (NY, NJ, CA, HI, RI, and Puerto Rico) State Agencies collect funds
29. Employee versus Employer Taxes FIT Employee Only Who Pays? Marital Status # of Exemptions Gross Pay Pay Frequency What is Tax Based On? Any Limits? N/A Refer to Tax Matrix Job Aid
30. Employee versus Employer Taxes SS Employee & Employer Who Pays? EE 4.2% ER 6.2% What is Tax Based On? Any Limits? $110,100 Refer to Tax Matrix Job Aid
31. Employee versus Employer Taxes Medicare Employee & Employer Who Pays? What is Tax Based On? 1.45% Any Limits? No Limit Refer to Tax Matrix Job Aid
32. Employee versus Employer Taxes FUTA Employer Only Who Pays? 6.2% (receive 5.4% credit if pay SUI correctly) = .8% What is Tax Based On? Any Limits? $7,000 Refer to Tax Matrix Job Aid
33. Employee versus Employer Taxes State Disability Insurance *EEs only in CA, HI, NY, RI *Both EE & ER in NJ and Puerto Rico Who Pays? What is Tax Based On? Varies by State Refer to Tax Matrix Job Aid
34. Employee versus Employer Taxes SUI *Employer Only *Employees pay too in NJ, PA, AK Who Pays? Experience Rate: 1. # of claims filed 2. Years of experience What is Tax Based On? Varies by State Any Limits? Refer to Tax Matrix Job Aid
35. Employee versus Employer Taxes SIT Employee Only Who Pays? What is Tax Based On? Varies by State Varies by State Any Limits? Refer to Tax Matrix Job Aid
36. Employee versus Employer Taxes CIT Employee Only Who Pays? What is Tax Based On? Varies by State Varies by State Any Limits? Refer to Tax Matrix Job Aid
37. Tax Deposits How are the federal tax funds deposited? Form 8109 Coupon – Eliminated as of 1/1/2011 EFTPS – Electronic Federal Tax Payment System All employers are required to deposit their taxes via EFTPS
38. EFTPS Electronic Federal Tax Payment System Threshold is dropped from $200,000 to $.00 in 2011 Required to deposit electronically Banks will no longer accept Form 8109
39. What is the Look Back Period? (needs to be updated) Helps determine a company’s deposit frequency and due dates. Based on federal deposit tax liability within a specified time frame Look back period = July 1 - June 30 of previous year Look Back Period for Calendar Year 2010 2009 2010 2011 July 1 Sept 30 Oct 1 Dec 31 Jan 1 Mar 31 Apr 1 Jun 30 Calendar Year Jan - Dec
40. Lookback Period Deposit Frequencies Wednesday or Friday, depending on what day of the week the employees are paid Semi-weekly Depositor Rule More than $50,000 $100,000 or More Not applicable Next banking day* If the total taxes for the lookback period are... The employer is covered under the... And must make their deposits by... Monthly Depositor Rule The 15th day of the following month $50,000 or less Note:For new employers, the total taxes for the look back period are considered to be zero; therefore, new employers are considered under the Monthly Depositor Rule for their first year in business * Employer is still considered either Monthly or Semi-Weekly
41. Federal Payroll Filings Federal payroll taxes are filed on which forms? 940 and 941 What must an employer file at the end of the year based on employee’s gross to net wages? W-2 and W-3
42. Reporting / Forms
43. Reporting / Forms
44. Reporting / Forms
45. Reporting / Forms
46. Closing Calculating payroll can be complicated Calculating payroll taxes as well as depositing & filing payroll taxes can be even more complicated. Payroll can vary by state, city, locality Payroll tax laws/limits seem to change yearly Difficult to keep up with ever changing laws Reference the Fast Wage & Tax Facts on www.accountant.adp.com to keep you current
47. Questions?
48. For Additional CPE Credits Ask Your Local ADP Representative How Go to www.accountant.adp.com and click on “CPE Program” to see a list of topics