Payroll Management

1. Payroll Management Jim Frazier, CPA Workshop Leader and Facilitator Rockhurst University Continuing Education Center National Seminars Group

3. Lessons • Tax levies • Learn to deal with difficult people • Responsibilities

4. Federal Agencies • IRS • DOL • SSA • BCIS • DOE • HHS • HUD Bureau of Citizenship and Immigration Services

5. State Agencies • Revenue • Wage and Hour • Unemployment • Child Support • Treasurer • Attorney General • State Disbursement Unit

6. Other Responsibilities • Yourself • Family • Boss • Employer • And…

7. The Golden Rule of Payroll

8. Contract With Employee Work for me I will pay you $$$ Fail and I’ll fire you. I’ll adjust that agreed upon amount arbitrarily

9. Know the Answers! • Deal with confrontational situations • Take the moral high ground • Win arguments • Have confidence / reduce stress • Be the recognized expert

10. Or at least… …ask smarter questions!

11. The Payroll Mission • Deliver a timely, accurate paycheck • Gross pay and deductions • Process related records and reports

12. Major Programming Items • Independent contractors • Wage and Hour • Overtime • Exempt and non-exempt • Working time • Deductions from pay • Record keeping The BIG Topics

13. Major Programming Items • Taxability of fringe benefits • Garnishments • W-2’s and W-4’s • Bonus stuff The BIG Topics

14. The Law of Immateriality

15. Beware! • Intentional and willful violations • Not good faith errors • Penalties get much more serious

16. Let’s Talk Penalties • Back wages and/or taxes • Interest • Penalties • Jail

17. There’s More! • Statutory penalties and interest • Lawyer fees and court costs • Accounting fees • Management time • Worker time • Distraction • Publicity • Shareholders • Employee relations

18. Bragging Rights • We are compliant with the law • We make every attempt • Let us know if you have a problem • We want to treat you right

19. One More Rule… Don’tPanic

20. Jim’s Rule of Workers If someone works or performs services for you, they’re your employee – and on your payroll. PPA 2-3

21. Classes of Workers • Independent contractors (self-employed) • Temporary • Leased • Vendor / outsourced employees • Your employees PPA 2-3

22. Employees and Contractors PPA 2-7

23. The Basic Concept

24. Why Treat Workers as Contractors? PPA 2

25. If They’re Misclassified… • Taxes not withheld • Labor laws • Other liabilities So classify them right!

26. Why Discuss Contractors? • You may not know your problems • Most likely to be detected • Expensive if caught • Relatively easy to fix

27. The Contractor’s Problem • They think they’re avoiding taxes • Still responsible for • FIT • SIT

28. Common Law Tests (IRS: Categories of Evidence Tests) • Behavioral control • Financial control • Relationship PPA 2-11

29. Behavioral Control • Training and instructions* • Work assignments and methods* • Can worker hire and fire* • Special expertise • Location and hours of work PPA 2-11

30. Financial Control • Un-reimbursed costs* • Paid by the job / guarantee • Other business and marketing* • Opportunity for profit or loss on job PPA 2-11

31. Type of Relationship • Written contract • Employee type benefits • Defined or continuing relationship • Other workers • Custom PPA 2-11

32. Typical Contractor Errors • Employee by day… • Returning employee or retirees • Casual, probationary, interns or temp • Telecommuters • As long as we issue 1099’s PPA 2-28

33. More Errors • We’ve got a contract • $600 • Beware of titles • Can’t afford it PPA 2-28

34. 1099’s and W-9’s “Form W-9 … is used by persons required to file information returns with the IRS to get the payee’s (or other person’s) correct TIN.“ W-9 instructions • W-9’s • 1099’s • Payments of more than $600 • Corporations • Lawyers • Medical and health services

35. Contractor Paperwork • W-9 (often on Web sites) • File with literature, brochures, biz card • Purchase orders • Invoices • Contract • SS-8 PPA 2

36. Safe Harbor • 1099’s • Consistent • Reasonable basis PPA 2-12

37. Penalties and Problems • FICA, FITW, FUTA • Unemployment taxes • Back OT wages • Other employment laws • State and local income taxes • Workers’ compensation • Garnishments • New hire reporting • Back benefits PPA 2-36

38. Avoid Getting Caught • W-2’s and 1099’s • Single 1099 • FEIN, DBA, incorporation • Contractor tax problems • (audit/collection) • Contractor complaints • Involuntary contractors PPA 2-35, 2-42*

39. The Auditor’s Objective • Did you obey the law? • Did you pay the correct amount? • Will I make my quota with you?

40. During the Audit… • Knowledge of law • Structure • Records

41. Worst Responses

42. The Best Answer

43. Document Why • Attorney and accountant letters • Official publications • Auditors’ memos • Reference books and manuals • Newsletters • Demonstrate good faith

44. The KEY Objective Get it in writing!

45. Minimum Needs • All state publications • State Web page • Basic guide • Your industry guide • Procedures manual • Big Book • Newsletter • Professional • Lawyer • Accountant • Consultant

46. More Payroll Resources • Multi-State guides • Posters • Garnishment guides • Federal Web sites • American Payroll Association

47. The Rest of the Library • Supplemental Big Book • Subscription services

48. Web Resources

49. Periodicals • Newsletters • Agencies • Service and software organizations • Organizations • Professionals • General business publications • Online news

50. Public Seminars • Seminars • Seminar companies • Agencies • Professionals • Services • Refresh • Different perspectives • Go at least once a year • It’s not gospel!