payroll 101 cpe seminar
DESCRIPTION
Payroll 101 CPE 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. . Agenda. The Payroll Equation Earnings Deductions Taxes - PowerPoint PPT PresentationTRANSCRIPT
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.
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Agenda
The Payroll Equation Earnings Deductions Taxes Tax Depositing and Filing ***What’s New***
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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
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What is the Payroll Equation? How Do You Arrive at Net Pay?
ExamplesGross 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
Gross Pay minus Taxes minus Deductions equals Net Pay
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What are Examples of Gross Earnings?
Regular Earnings: Salary or Hourly Overtime Vacation/Sick/Personal/Holiday Commission Shift Pay Taxable Fringe Benefits Bonus
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There may be times when there are conflicts between federal law, state law, and local law
How do you know which one to use?
Example: FLSA Minimum Wage = $7.25 California Minimum Wage = $8.00 San Francisco Minimum Wage= $7.50
Very simple --- Whichever law benefits the employee
Employer must pay an employee at least the greater of federal law or state law
What is the current federal minimum wage?
Which should
you use?
Minimum Wage
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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
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What is the White Collar Test?
Three Parts of Test:1) Salary-level: (amount
the employee is paid) At least $455 per week
2) Salary-basis: (how the employee is paid)
Guaranteed salary for any week in which any work is performed
3) Duties: (the work that is performed)
Primary duty must meet specific criteria outlined within exemption
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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.
Employee vs. Independent Contractor
Employee vs. Independent Contractor
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.
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.
IRS Amnesty Program: The Voluntary Classification Settlement Program
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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?
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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
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Examples of Pre-Tax Deductions
Cafeteria Plans - Internal Revenue Code (IRC) Section 125
Deferred Compensation Plans
IRC Sections - 401k, 403b (non-profits)
Qualified Pension Plan Contribution Limits
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FIT SS/Med FUTA401k, 403b Y N NSection 125 Medical Y Y Y
Does pre-tax exemption apply?
Which Taxes Are Affected?
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How Do the Deductions Affect Wages?
FIT SS Medicare StateTaxable Taxable Taxable Taxable
Gross Pay $1,000 $1,000 $1,000 $1,000
Section 125 (Health Ins.) $100 $100 $100 $0
401k Deduction $50 $0 $0 $0
Taxable Pay $850 $900 $900 $1,000
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How Do the Deductions Affect Wages?
FIT SS Medicare StateTaxable Taxable Taxable Taxable
Gross Pay $1,000 $1,000 $1,000 $1,000
Section 125 (Health Ins.) $100 $100 $100 $0
401k Deduction $50 $0 $0 $0
Taxable Pay $850 $900 $900 $1,000
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How Do the Deductions Affect Wages?
FIT SS Medicare StateTaxable Taxable Taxable Taxable
Gross Pay $1,000 $1,000 $1,000 $1,000
Section 125 (Health Ins.) $100 $100 $100 $0
401k Deduction $50 $0 $0 $0
Taxable Pay $850 $900 $900 $1,000
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How Do the Deductions Affect Wages?
FIT SS Medicare StateTaxable Taxable Taxable Taxable
Gross Pay $1,000 $1,000 $1,000 $1,000
Section 125 (Health Ins.) $100 $100 $100 $0
401k Deduction $50 $0 $0 $0
Taxable Pay $850 $900 $900 $1,000
Decrease in taxable wages equal
Increase in employees’ net pay & a
Decrease in an employer’s tax liability.
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How is Federal Income Tax Calculated?
Methods of calculation:
Wage Bracket
Percentage
Who issues these tax tables and where do
you get them?
(insert a 2012 picture or take out)
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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
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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)
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Where can you find out info about specific states www.accountant.adp.com
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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
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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
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Employee versus Employer Taxes
Refer to Tax Matrix Job Aid
FIT
Who Pays?
What is Tax Based On?
Any Limits?
Employee Only
Marital Status # of Exemptions
Gross Pay Pay Frequency
N/A
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Employee versus Employer Taxes
Refer to Tax Matrix Job Aid
SS
Who Pays?
What is Tax Based On?
Any Limits?
Employee & Employer
EE 4.2%ER 6.2%
$110,100
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Employee versus Employer Taxes
Refer to Tax Matrix Job Aid
Medicare
Who Pays?
What is Tax Based On?
Any Limits?
Employee & Employer
1.45%
No Limit
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Employee versus Employer Taxes
Refer to Tax Matrix Job Aid
FUTA
Who Pays?
What is Tax Based On?
Any Limits?
Employer Only
6.2% (receive 5.4% credit if pay SUI correctly) = .8%
$7,000
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Employee versus Employer Taxes
Refer to Tax Matrix Job Aid
State Disability Insurance
Who Pays?
What is Tax Based On?
*EEs only in CA, HI, NY, RI*Both EE & ER in NJ and Puerto Rico
Varies by State
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Employee versus Employer Taxes
Refer to Tax Matrix Job Aid
SUI
Who Pays?
What is Tax Based On?
Any Limits?
*Employer Only*Employees pay too in NJ, PA, AK
Experience Rate:
1. # of claims filed2. Years of experience
Varies by State
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Employee versus Employer Taxes
Refer to Tax Matrix Job Aid
SIT
Who Pays?
What is Tax Based On?
Any Limits?
Employee Only
Varies by State
Varies by State
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Employee versus Employer Taxes
Refer to Tax Matrix Job Aid
CIT
Who Pays?
What is Tax Based On?
Any Limits?
Employee Only
Varies by State
Varies by State
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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
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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
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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
July 1
Sept 30
Oct 1
Dec 31
Jan 1
Mar 31
Apr 1
Jun 30
CalendarYear
Jan - Dec
2009 2010 2011
Look Back Period for Calendar Year 2010
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Lookback Period Deposit Frequencies
If the total taxes for the lookback period are...
The employer is covered under the...
And must make their deposits by...
$50,000 or less Monthly Depositor Rule
The 15th day of the following month
More than $50,000 Semi-weekly Depositor Rule
Wednesday or Friday, depending on what day of the week the employees are paid
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
Not applicable Next banking day*$100,000 or More
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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
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Reporting / Forms
Form Type of Tax FiledReturn
Due DateDeposit
Frequency
Form 940Federal
Unemployment Annual 1/31 Quarterly
Form 941FIT, SS,
Medicare, AEIC Quarterly4/30, 7/31, 10/31, 1/31
Monthly; Semi-Weekly
Form W-2FIT, SS,
Medicare, AEIC AnnualEE - 1/31
SSA - 2/28 N/AForm W-3 Transmittal
FIT, SS, Medicare, AEIC Annual SSA - 2/28 N/A
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Reporting / Forms
Form Type of Tax FiledReturn
Due DateDeposit
Frequency
Form 940Federal
Unemployment Annual 1/31 Quarterly
Form 941FIT, SS,
Medicare, AEIC Quarterly4/30, 7/31, 10/31, 1/31
Monthly; Semi-Weekly
Form W-2FIT, SS,
Medicare, AEIC AnnualEE - 1/31
SSA - 2/28 N/AForm W-3 Transmittal
FIT, SS, Medicare, AEIC Annual SSA - 2/28 N/A
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Reporting / Forms
Form Type of Tax FiledReturn
Due DateDeposit
Frequency
Form 940Federal
Unemployment Annual 1/31 Quarterly
Form 941FIT, SS,
Medicare, AEIC Quarterly4/30, 7/31, 10/31, 1/31
Monthly; Semi-Weekly
Form W-2FIT, SS,
Medicare, AEIC AnnualEE - 1/31
SSA - 2/29/12 N/AForm W-3 Transmittal
FIT, SS, Medicare, AEIC Annual SSA - 2/29/12 N/A
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Reporting / Forms
Type of Tax FiledReturn
Due DateDeposit
FrequencyTo what Agency
Federal Unemployment
Annual 940 1/31 Quarterly IRS
FIT, SS, Medicare, AEIC
Quarterly 941
4/30, 7/31, 10/31, 1/31
Monthly; Semi-Weekly IRS
FIT, SS, Medicare, AEIC
Annual W-2
EE - 1/31 SSA - 2/29/12 N/A SSA
FIT, SS, Medicare, AEIC
Annual W-3 SSA - 2/29/12 N/A SSA
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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
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Questions?
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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