Payroll is more complicated than you think. For example, you may not even know that you have to pay taxes on holiday pay and bonuses. Plus, the laws and regulations regarding payroll differ from state to state. Plus, you should make sure your vendor is bonded for fidelity. Read on to learn more about the world of payroll.
Payroll is More Complicated
Payroll is a critical task that a company must perform every month. While the process may not seem complex, it entails several steps. Many of these tasks are static, while others can vary from one pay period to the next. For example, hourly employees must keep track of their overtime. This is generally done through time and attendance software or a clock-in/clock-out system.
Many payroll functions overlap with other areas of accounting, such as QuickBooks or Quicken. Additionally, payroll specialists should be comfortable working with cloud-based applications and remote communication tools. Many of their co-workers may work remotely, so they must be able to communicate and collaborate effectively.
Payroll Taxes on Bonuses and Holiday Pay
If your employees receive a holiday gift or bonus as part of their pay, you may have to pay payroll taxes on these items. Several types of bonuses are taxable according to IRS regulations. These can include cash, gift certificates, or holiday turkeys. Infrequently given monetary gifts are generally not taxable, but yearly gifts may be taxable. Be sure to check your policies to ensure you are complying with the rules.
Bonus payments can be deducted, but employers should ensure they’re reasonable. To be deductible, a bonus must be “ordinary and necessary” for the trade or business. For example, a holiday party can also qualify as business entertainment.
Payroll Requirements Vary by State
Payroll requirements vary from state to state, so companies must keep up-to-date on state and local deadlines and tax changes. In addition, these regulations can include the required information on a paystub, payday frequency requirements, unused vacation pay upon termination, and more.
Payroll records must be maintained for each employee, including the total number of hours worked and the types of hours worked. Records must also reflect the time and day of the week the employee’s workweek begins. Additionally, employees must be given access to their payroll records if they request it. Keeping payroll records is essential for compliance with state laws and federal laws.
Paycheck frequency laws vary by state but require businesses to pay employees at a set schedule. For example, payroll should occur at least twice a month or no more than 16 days apart. In cases where this frequency is not possible or inconvenient, employers can ask the labor commissioner to consider a less frequent pay period.
Payroll Vendors Should be Bonded for Fidelity Purposes
To avoid unnecessary hassles and spend less on payroll, businesses should outsource payroll to a reputable bonded company for fidelity purposes. These bonds protect business owners from being cheated out of money by dishonest employees or from a lack of payment.
Direct deposit is a Great Way to Thank your Payroll Team
You can set up direct deposit if you want to thank your payroll team. The payroll service provider will withdraw money from your account, confirm the transaction and then send it to the employee. To get started, you must first gather some information about the employee. You will need their Social Security number, bank account number, and routing number. Once you have collected this information, you need to authorize the employee to receive direct deposits.
Once you have set up direct deposit, you should set up the payment schedule. This will give you time to process the payroll. Then, make sure to communicate the schedule with employees. You may need to set a cut-off date for time cards. Also, set up the payroll process so the payment can be sent out on time. Some banks require that the information be sent a few days in advance.
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