The information posted on PayrollTalk is for informational purposes only and is not intended to substitute for obtaining accounting, payroll, tax, or financial advice from a professional accountant.

Pay Period & Paying Taxes

I inherited payroll when I excepted the job of HR Manager. I have never done payroll before so I am naive in a lot of ways. I attended my first payroll law seminar which has left me with a lot of unanswered questions. Assuming that the past payroll people knew what they were doing I have just kept doing payroll the way it was set up. After attending that seminar I am unsure if we are doing things correctly.

We pay our employees bi-monthly. The pay periods run from the 24th to the 8th and the 9th to the 23rd of each month. We only pay taxes twice a month. The practices I question now are as follows. During the pay period we have per diem employees that get paid once a week and it has also been common practice to cut retro active raise checks during the pay periods and distribute them before pay day.

So my questions are: should we be paying taxes every week because we pay the per diem people once a week or move the per diem people to a bi-monthly pay period? Does issuing retro active raise checks before payday change when our taxes are due? Does issuing a final check before pay day to an employee that has terminated change when taxes are due?
«1

Comments

  • Well first things first, it is semi-monthly. :) Bi-monthly would mean that you get paid every other month.
  • Well one thing is goes all taxes go by check date not pay periods. Very important to remember. secoundly this is kind of a complicated question. Each tax has a different frequency. Most large (over 50K in federal 941 liability is what I am classifying as a large employer here) would pay their taxes semi-weekly. I would read and re-read the IRS Publication 15 to get a better idea about this. If you company is semi-monthly there are two check dates (or liability dates) in a month, sounds about right that two payments would be due. Now WHEN the payments are due are based off of what day your check date falls on.

    Keep in mind this is just federal and not state and local. they have their own rules. Also there are quarterly and annual reports and payments that need to be filed. I would suggest if you have no payroll backround to outsource your payroll or take a bunch of class on payroll and tax.

    Best of luck to ya!!
  • Oh yeah and as far as the rest of your questions, me personal I would include them with the semi-monthly payroll, but everyone has there own thing. the only way these weekly payrolls would not be due more frequently would if they fall under the 2% rule which is shaky ground IMO.

    Retro pay also goes by check dates. As far as the terminating payouts, depends on the state.
  • New2payroll, here is the link to IRS Publication 15. Start reading from page 19, Depositing Taxes. It should answer all of your questions.

    http://www.irs.gov/pub/irs-pdf/p15.pdf
  • NewtoPayroll, do you use an outside vendor to process your payroll like Paychex or ADP?
    If so, then the $ is "constructively earned" by the employee based on the pay date on which the manual check is processed through your payroll company.

    For example, we pay every other Friday...10/10, 10/24, etc...if I cut someone a check TODAY 9/30 for retro wages or to correct a payroll error but then processed the manual check through ADP with a check date of 10/10/08, all applicable taxes would be due based on that pay date and our comapy's tax payment frequency. Our liability is normally over 100K, so we pay it within 3 days of pay date...I hope that helps.
  • Payrollnazi, if you're saying that the taxes on a manual check you wrote dated 9/30 was posted on the pay run with checks dated 10/10 aren't considered a liability until 10/10, I beg to differ (legally, that is).

    Now I know that's how most outsourcers work. And I also know that the risk of being "caught" is low. But there is no exception in the law, just because of the check date on the payroll on which you process the adjustment.
  • I totally agree with pattypa, the taxes are based on when you give the employee the money not when the manual adjustment is put into a payroll system!

    AND

    If are referring to your federal tax liability being over 100K and you're paying it within three days - you're paying it late - it should be paid the next business day!
  • I agree with both Patty and DeeDee. If you cut a manual check on 09/30/08 (assuming taxes are under $100,000) then the taxes are due on 10/03/08. What matters is when you gave the employee the check and I am going to guess that check was not dated 10/10/08 when you gave it to him/her.
  • If writing a check outside payroll would obligate us to pay taxes immediately, it would make sense that entering manual checks would be impossible.

    From a different payroll blog site:
    I ran payroll on Wednesday this week and may have to cut an additional check
    for someone that did not get paid a bonus. If I run a manual check to them,
    how does that affect the taxes for the IRS which I have already paid? Can I
    roll that amount into the next payment on the next payroll run? Thanks


    Reply from a reliable person
    You mean cut a manual payroll check?
    If so, then yes, the tax liability will be added to the existing
    balance in your tax liability account(s) and you can remit with your
    next tax payment.


    From a second separate payroll site:
    The other solution would be for us to calculate the additional net payroll. The client then issues a manual check to the employee. This manual check and taxes would be processed with the next payroll run.

    So, I'm pretty sure I'm not off the mark with my reply.
  • If writing a check outside payroll would obligate us to pay taxes immediately, it would make sense that entering manual checks would be impossible.

    From a different payroll blog site:
    I ran payroll on Wednesday this week and may have to cut an additional check
    for someone that did not get paid a bonus. If I run a manual check to them,
    how does that affect the taxes for the IRS which I have already paid? Can I
    roll that amount into the next payment on the next payroll run? Thanks


    Reply from a reliable person
    You mean cut a manual payroll check?
    If so, then yes, the tax liability will be added to the existing
    balance in your tax liability account(s) and you can remit with your
    next tax payment.


    From a second separate payroll site:
    The other solution would be for us to calculate the additional net payroll. The client then issues a manual check to the employee. This manual check and taxes would be processed with the next payroll run.

    So, I'm pretty sure I'm not off the mark with my reply.

    I'm pretty sure you are (off the mark, that is). The date on a check is irrelevant, it's when the employee has receipt of it that determines the tax liability date. And as far as cutting manual checks, this does not mean taxes are due immediately. It means they're due whenever they're due based on your company's frequency. You just have to record the liability dates separately and perhaps pay taxes earlier than you would, but not necessarily.

    Message boards are nice, but do you really know the expertise of anyone who posts? Someone can have CPP after their name, but I-R-S is what I'd go by.
  • In all my years of running payroll (and being on both sides of the fence), I've never been told nor have I informed a client to make a tax payment based on what date an employee receives funds from a check the employer has written.

    If this was the case, they'd either be running payrolls left and right or making payments on their own.

    It would be a logistical payroll nightmare to keep track of who paid what, how much, to which agency and when.

    If I had been doing something significant like that incorrectly for the past ten years, someone would have told me or I would have lost my job.
  • I wonder if payrollnazi's quotes came off an ADP or PayChex, etc. forum?

    I am sure that most customers of ADP, PayChex, etc. want to do it that way too due to the cost of running another payroll.
  • So for those who don't use a third party to process payroll, if you do a manual check inbetween payrolls how do you handle the taxes? You deposit on the weekly schedule for that one paycheck?
  • I found this paragraph in the Payroll Source Book on page 6-3:

    Postdating or backdating checks:
    Regardless of the date that is printed on an employee's paycheck, the date it is actually or constructively provided to the employee is the date that triggers the employer's withholding and deposit obligations. While the date on a paycheck may help prove the date of actual or constructive payment, it is not conclusive and may be challenged by other evidence.

    Below are links to IRS regulations:

    IRS REG: 1.451-2; 31.312(a)-2; 31.3301-4: 31.3402(a)-1(b)
    Rev. Rul. 73-99, 1973-1 CB412

    Where I work we use SAP (in-house system) to process payroll. Our October pay dates are 10/1/08, 10/15/08 and 10/29/08. Let's say an employee terminates on 10/7/2008, is moving out of state and wants their final payout check. I would run an off cycle payroll through SAP to cut a manual check. Since I will be giving the check to the employee on 10/7/2008 that is the check date I will be using. The taxes calculated on that check are due on 10/10/08. When I run the 4th quarter 941 and schedule B, automatically produced by SAP, my tax liability dates will be 10/1/08, 10/7/08, 10/15/08 and 10/29/08. If I did not make a timely federal tax deposit on the 10/7/08 manual check the IRS would penalize us for late payment.

    At my old employer we had 35 EIN's. I realize it is difficult to track off cycles for all of those EIN's but with good organizational skills it can easily be done. I never missed a tax payment and my 6 years of employment there were penalty free.
  • PayLady wrote:
    I never missed a tax payment and my 6 years of employment there were penalty free.

    WOOT!!!!!!!!!!!!!!! YAY, YOU!!!!!!!!!!!!!!! :lol:
Sign In or Register to comment.