presented tuesday, november 3, 2015 · reconciliation of form 941 to form w-2 ©2015 the payroll...

©2015 The Payroll Advisor

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Presented Tuesday, November 3, 2015

Housekeeping


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Credit Questions Today’s

topic Speaker

To earn RCH credit you must


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Stay on the webinar, online for the full 60 minutes

Be watching using your unique URL

Certificates delivered by email, to registered email, by December 3rd

About the Speaker


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Vicki M. Lambert, CPP, is President and Academic Director of

The Payroll Advisor™, a firm specializing in payroll education

and training. The company’s website

www.thepayrolladvisor.com offers a subscription payroll

news service which keeps payroll professionals up-to-date on

the latest rules and regulations.

As an adjunct faculty member at Brandman University, Ms.

Lambert is the creator of and instructor for the Practical

Payroll Online payroll training program, which is approved by

the APA for recertification credits.

http://www.thepayrolladvisor.com/

What We Will Cover Today


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1. Reconciling Form 941 to Forms W-2

2. Conducting internal audits to find compliance issues for before an external one finds you

3. Going paperless to decrease costs and increase efficiency

4. Benchmarking your payroll to determine where you are and where you are going

Reconciling Forms 941 to Forms W-2 on a Quarterly Basis

Key Area to help avoid audits by IRS and SSA

Key Practice #1 7


Reconciling Form 941


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SSA Reconciliation Points

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Item W-2 Block 941 Line 944 Line

Social Security Wages 3 5a 4a

Social Security Tips 7 5b 4b

Medicare Wages/Tips 5 5c 4c

Additional Medicare Wages/Tips 5 5d 4d

Federal Income Tax Withheld 2 3 2

Compare the amounts to be reported to SSA on Form W-3

to the sum of the amounts you reported to IRS on Forms

941, 943, 944, or Schedule H for the tax year. The following

amounts on the IRS and SSA report should match:


Reconciliation of Form 941 to Form W-2


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Lines on Form 941 To Boxes on Form W-2

2—Total Wages and tips and other

compensation

T

o

1—Wages, tips other compensation

3—Total income tax withheld from wages,

tips and other compensation T

o

2–Federal income tax withheld

5a – Taxable Social Security wages

column 1

T

o

3—Social security wages

5a column 2 T

o

4 – Social security tax withheld

5c –Taxable Medicare wages and tips

column 1

T

o 5 – Medicare wages and tips 5d—Taxable wages & tips subject to

Additional Medicare Tax withholding

5c & 5d column 2 combined T

o

6 – Medicare tax withheld

What the SSA Will Audit


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Conducting Internal Audits to Find Compliance Issues Before an External

Audit Finds You

Key Area because IRS and DOL Audits are increasing to find

compliance issues especially in fringe benefits and calculating overtime

Key Practice #2 14


Strategies to Conduct Internal Compliance Audits

Not a quick project but a department wide project

Allow months to a year to conduct

Any task payroll does is subject to audit

Conduct the audit on an aspect by aspect basis to allow a starting and stopping point along the way

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Setting Up…


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This makes it easier to complete each phase of the audit

Can handle other projects, and then return to the next phase

Speed is not the concern for this audit but accuracy

Must conduct the same kind of thorough audit of all the payroll procedures as an external auditor would do—You are the IRS Agent!

Setting Up…


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When to start the audit is a tough call

Best time is beginning of a new year—March is fine

Employees are less likely to notice/question the changes that may occur

Forms W-2 are easy to adjust

Entire department can be verified in same calendar year

Strategies…

The audit can be conducted with the full knowledge of the payroll staff

Not a secret audit to find fraud or to “catch” someone doing something wrong

Purpose is to find areas that are out of compliance and fix them before ever facing an external audit

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Strategies…

Payroll staff can be useful in this endeavor

Staff can audit each other and manager

No one working on the focus of audit does the audit for that task

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Strategies…

Don’t confuse this type of audit with accounting firm audits or other “internal audits”. Those are looking for compliance with general accounting practices or principles

Audit both policy and practice. Your policy may be in compliance but your actual practice may not be.

Never assume your company policy is in compliance

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Setting Up the Internal Audit

There are two points that are critical for the payroll manager to complete before beginning any internal audit

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First Point…

The person conducting the audit should know all the laws, rules and regulations concerning the topic being audited:

These should be put in writing and include both federal and state regulations

This should not be done from memory but from primary sources such as the DOL/IRS website or secondary sources such as manuals or web-based products

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Including…

The company policy for each topic should also be included

Many times the federal or state requirements are exceeded by company policy

Employees can sue if company policy is not followed even if the federal and state requirements are, so they should be included in the audit as well

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Second Point

A comprehensive list of all payroll tasks to be audited should be completed, in writing, either prior to beginning the audit or as you go along:

This gives a “playlist” of the tasks to be accomplished and what lies ahead

Helps with assembling the law book discussed in the previous bullet

Also assists in compiling the time frame and work schedule for the audit

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What to Cover

Should include:

All facets of paying employees that are covered by the Department of Labor

All taxation and reporting facets

Don’t forget the state equivalents

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Before Beginning…

Create template for conducting the audit for each task

Create report template for audit findings for each task

Create compliance problem template

Create general template of final audit report for department

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How to Conduct It

Written, formal report for each procedures or policy reviewed

This report the basis for new controls if needed

Not a quick scan

Set up spread sheets and review forms

Compare the regulations to the actual practice and then to policy

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Areas of Concern for DOL

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Regular rate of pay calculations

Lunches docked but not taken

Overtime for semi-monthly

payroll periods

Weighted averages used

for overtime payment when

employee works at more than one

rate per week

Off the clock work

State Side…

Now look at the same areas for the states where employees are performing work

Anything unique such as CA OT?

Do they follow federal?

Are meal and rest periods mandatory?

Check for postings, paystubs, notices and other state related items

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Auditing for Tax Compliance

All facets of taxation including all payments made through the payroll and through accounts payable and offered through human resources---Everything!

Don’t forget the state and local taxes

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What to Do If Noncompliance Issue Is Found

Set up procedures in advance to report to management any noncompliance issues that are discovered.

Deal with each one as they arise after the completion of the audit for that procedure

Keep written records to show corrections to procedures or to show why they were not corrected

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Going Paperless to Decrease Costs and Increase Efficiency

Key area in today’s payroll world because we all must

reduce our department’s cost and increase our efficiency to stay competitive

Key Practice #3 32


Today… 33

Electronic payments surpassed paper payments in 2003

Most to all of Europe is on direct deposit

YET ONLY…

Around 72% of U.S. employees are on direct deposit

WHY?


Could Be… 34

Direct deposit no longer new to employees as the “next best thing”

Life is hectic and not high priority for the employee

Are part of the “unbanked”

Or maybe payroll got complacent and satisfied with 2/3 of the employees?


Cost and Efficiency 35

Cost savings and increased efficiency are the keys here

So the more employees on direct deposit directly relates to the more the department is saving on direct costs

Less time spent on handling the paper equals increased efficiency

But it will not “magically” appear for you!


5 Steps to Improving Direct Deposit

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1. Get your house in order first

2. Survey your employees

3. Create the target marketing materials

4. Conduct the campaign

5. Remember new employees along the way


Get Your House in Order First 37

Are your sign up forms complicated, out-of-date, cumbersome or stale?

Do you include directions and samples to assist employees in completing forms?

Are the forms easy to access and submit but still secure—remember they are attaching a check of their own

Do you acknowledge the receipt of the form to alleviate privacy worries

Do you explain how long the process will take?


Survey Your Employees 38

Target survey of only those who don’t use direct deposit

Ask them upfront why they don’t use direct deposit

Help narrow your marketing scope

Can be quick e-mail or paper form

Can be essay style or multiple choice check box style


Create the Target Marketing Materials

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Once survey is done create the marketing materials to target the reasons given in the survey

Design the marketing to address the majority of needs or concerns

Use materials that will reach them such as paycheck stuffers


Conduct the Campaign 40

Conduct the campaign on many fronts

First advertise the campaign outright to let the employees know what is going on—company newsletter, intranet sites whatever…

Personalized letter: targeted campaign extolling the virtues of direct deposit

Personalized e-mail: use after the paper letter to remind the employee about signing up…keep it going until they sign up


Remember New Employees


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Get them when they are hired How is a new hired informed about the direct

deposit program? Form in new hire packet? Bad idea! Mentioned in passing after Form W-4 but before

health insurance in new employee orientation? Bad Idea!

Not even that much? REALLY BAD IDEA!

No guarantee new employees will automatically sign up unless you can prove they do

Steps to Improving Pay Card Program


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Going to use the same steps but look at it from a different perspective. We are going after the “unbanked” this time not the “undecided”. If we get crossovers then great but not the goal.

1. Get your house in order first

2. Survey your employees

3. Create the target marketing materials

4. Conduct the campaign

5. Remember new employees along the way

Final Thoughts


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Offer direct deposit or pay card enrollment during other open enrollment periods such as health insurance or charity drives

Keeps the programs alive, fresh and active

Your goal must be 100% electronic so keep it all going

There is no “time period” for the campaigns

Change to electronic pay statements to encourage an all electronic environment

Use “green” as incentive for all campaigns

Going Electronic with Timekeeping


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According to the American Payroll Association’s The Payroll Source:

“…as much as 1% to 3% of labor costs are wasted on errors, processing costs, faulty time recording, and noncompliance penalties…Time and Attendance Automation can help control these costs”

Benefits of an Electronic System 45

Less time spent processing

Fewer errors introduced during processing

Decreased costs

Increased compliance with federal and state wage and hour regulations

More efficient data for use by management to control labor costs


Electronic Filing of Reports


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There are states that require employers to file quarterly reports electronically but we are discussing when the state gives the option to e-file or paper file

California is a perfect example

Employer may paper file the DE 9 and DE 9C

But EDD offers the option of filing online using e-Services for Business

To cut down on paper use always use the e-file option even if not mandatory

EFT to Save Time and Paper


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Many states have mandatory limits that require EFT payments—California for example

If average deposit for SDI and PIT is $20,000 or more for the prior state fiscal year employer is required to pay all SDI and PIT deposits by EFT during the next calendar year regardless of dollar amount Go Green—do all deposits via EFT regardless if required by the state—just as done for federal taxes

E-IWO for Child Support


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Office of Child Support Enforcement working with employers and states to automate the income withholding process with electronic income withholding orders or e-IWO

2 types of implementation options



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States electronically send IWOs to employers

Employers send acknowledgements to states

A single interface for all exchange partners

Federal Employer Identification Number (FEIN) is the key to passing data between the state and employer

Notification of terminations and lump sums by employer can be handled through the e-IWO Portal



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Secure File Transfer Program (SFTP) is used to send the e-IWOs

IWOs are not sent via e-mail

Can receive all IWOs at one central location

Can save money if currently processing many IWOs or if trying to cut down on paper

E-IWO Options

Medium to large employer who has IT resources that can commit several months to programming

IWOs sent in flat file format or .XML document

You process and make appropriate updates to payroll system

Get PDF of IWO

You create acknowledgement record whether accepting or rejecting

Takes 3-5 months to implement

Receive small number of IWOs or have no IT resources

Receive an image ready PDF copy of the IWO and a prefilled acknowledgment as an excel spreadsheet or PDF

Takes 2-4 weeks to implement

Need to configure server and directories so some IT support is still needed

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Option 1—System to System Option 2—No Programing Option

(NPO)

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PDF

Acknowledgement

Sample


Want a Single Acknowledgement Entry Form?


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XLS is for you

Receive a IWO PDF of each income withholding order sent to you by a state and a single spreadsheet for acknowledging

Enter “accept” or “reject” for each row

Supple a reason code if rejecting

Save the file

Move to outbound directory

You are done

©2015 The Payroll Advisor 54

XLS Acknowledgment Sample

The Employer Can Also


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Notify a state when an employee is terminated

Notify a state when an employee is going to receive a lump sum payment

Employer controls when the notices are released

Can also do on Employer’s Services Web Application if not using e-IWO

How to Enroll


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Must register by completing the e-IWO profile form and providing FEINs

Profile form includes: Agreement to exchange data

Contact information

Exchange preferences (system to system, PDF or excel spreadsheet)

File names

Server info such as User ID, Password, IP Address, Host Name, directory Name and Port

©2015 The Payroll Advisor 57

Currently using e-IWO Currently developing e-IWO Not using e-IWO

Map courtesy of the OCSE

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Get Rid of the Crates!


Contact Bill Stuart for more

information:

E-mail:

[email protected]

Phone: 518-399-9241

This payroll professional was the

first tester of the system. She

gets 30,000 IWOs a month—she

loves the e-IWO!

mailto:[email protected]

Paying by EFT


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Only 15 states require child support to be paid electronically. These include: CA, FL, IL, IN, IA, MA, NE, NV, ND, OH, OR, PA, TX, VA, and WV

All state child support agencies except for South Carolina accept payments by EFT/EDI (electronic funds transfer/electronic data interchange)

EDI includes the identifying information such as case number to properly apply the payment

Electronic Form W-4


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May establish system that allows employees to submit their initial form or change existing form electronically

Paper form must be available as well

Paper form can be required for some employees if business reason justifies

Must be able to provide questionable forms to IRS electronically

Tech Specs for Electronic Forms


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Electronic version must contain exact same info as the paper version-no exceptions

Must be PIN or verified system

Lock-in letter compliance must be available

Perjury statement must be there

Employees must understand that it is signed under penalty of perjury just like the paper form

Tech Spec Continued


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Electronic signature required

Must be able to print hard copy

All other regulations apply the same as paper form

Practical Point: Good to have a system that requires employee to acknowledge perjury statement in order to submit as a separate step

Electronic Forms W-2 to Employees

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Software or website specs will vary

Employee must consent—electronic consent even if consenting on paper

Big stumbling block is disclosure requirements

Statement can be furnished on the web if employee given access info

See link section – IRS code


Disclosure Requirements

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May get paper if they want it

How long will the consent last

Procedure for paper copy after giving consent

How to withdraw consent and how it is confirmed

Conditions on when electronic Form W-2 is not available

Procedures for updating contact info for employee

Employer must notify if changes in contact info for employer


Duplicate Form W-2

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Nothing in the regulations require a duplicate form to be on paper

No disclosure required for duplicate forms

May require employee to download—should furnish printer and computer to use just in case

Employers are not prohibited from charging a fee for the issuance of duplicate Form W-2 per IRS Code—charge for paper not for electronic?


What about Paystubs?


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40 states have some type of requirement for paystubs or pay statements

Paper or electronic-7 states have enacted legislation permitted electronic 1 has issued statement

DE, HI, IA, ME, MN, NC, OK, and OR

CA, NM, NY & VT employee must agree to it

What about Paystubs?


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40 states have some type of requirement for paystubs or pay statements

Paper or electronic-7 states have enacted legislation permitted electronic 1 has issued statement

DE, HI, IA, ME, MN, NC, OK, and OR

CA, NM, NY & VT employee must agree to it

Going Paperless Internally


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How do you handle vacation requests? Does the employee submit a paper form?

Could it be done electronically via e-mail and PDFs?

How are address changes handled?

How is direct deposit set up—on paper?

Could you set up employee self service portals to handle such items as address changes, voluntary deduction information, and direct deposit information

Websites


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If you have one they must be up-to-date

If you don’t have one—get one if possible

PDF files of all forms, links to IRS or state info

FAQs and all policies

Examples

Benchmarking Your Payroll: Find Out Where You Are and Determine Where You

Are Going

Key area because you cannot move forward unless you

know where you are now

Key Practice #4 70


What is Benchmarking-Definitions


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1. The process of identifying, understanding, and adapting outstanding practices and processes from organizations anywhere in the world to help your organization improve its performance—American Productivity & Quality Center

2. Seeking out superior performance through the systematic search for and use of best practices including innovative ideas, effective operating procedures, and successful strategies—Bogan and English Benchmarking for Best Practices

3. A process for identifying and importing best practices to improve performance—A best practice is “anything better than your current practice”

4. The American Heritage Dictionary of the English Language defines a benchmark as “a standard by which something can be measured or judged”. As a verb, to benchmark means “to measure (a rival’s product) according to specified standards in order to compare it with and improve one’s own product”.

Benchmarking…


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Actually term is borrowed from surveyors

If a surveyor can mark a known position then that position serves as a reference point for other measurements and other points

The goal of using a benchmark is to drive improvements by assessing performance against other who have similar products, traits, organizations etc.

Powerful Tool


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Powerful management tool because it overcomes what is known as paradigm blindness…in payroll this is the old axiom: “The way we do it is the best because that is the way be have always done it”.

Any business process can be benchmarked

“Alone, I am satisfied with myself. With others, I am beset by troubling comparisons—Mason Cooley

What Benchmarking is Not


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It is not a simple comparative study, copying practices from other organizations, performance assessment or a comparative analysis—it is not a college research paper or an article for a monthly newsletter

You are not looking for the best performance but the best practice

Best practices cut costs and maintain compliance

Types of Benchmarking

©The Payroll Advisor, 2015

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Benchmarking types vary and have numerous names

But the one that focuses on processes or procedures is designed for payroll departments

Process Benchmarking


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Focuses on specific work processes

Identifies the best operating practices

Uncovers how well other companies perform in comparison to you and how they achieve that performance

Example


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How many employees do you have on direct deposit? How many do they have?

What did they do, what method did they use or what procedure do they have in place that gets more employees to use direct deposit than you do?

How can we incorporate that procedure to improve our numbers?

Before Establishing a Benchmark Program…


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Before beginning a benchmark program you need to focus on 3 things:

First you need to recognize that benchmarking takes a new mentality—I am probably not the best in everything and probably not perfect in everything I do--Somebody does it better

Second you must be eager to learn from others

Third you must remember that it is adapt rather than adopt—learn about it and adapt it to your payroll

Are There Any Questions?


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How Can Ascentis Help Me?

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Process payroll

• Real time flexible processing

• 100% accuracy

• Reduce processing time by up to 30%

Employee portal

• Paycheck data

• Paystubs

• Tax forms

• Paycheck simulation tools

To earn RCH credit you must


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Stay on the webinar, online for the full 60 minutes

Be watching using your unique URL

Certificates delivered by email, to registered email, by December 3rd

On-Demand Webinars

Watch from anywhere, at anytime, at no cost to you!

82


Download Slides? Watch again? 83


Sharing the Education 84


Contact Us

[email protected]

www.ascentis.com

800.229.2713

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presented tuesday, november 3, 2015 · reconciliation of form 941 to form w-2 ©2015 the payroll...

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