Sick/Disability Pay A typical company benefit plan allows for the accrual of a fixed number of sick days per year. When an illness forces an employee to stay home, the sick time accrual is used in place of work hours, so ... [full story]

Qualified Retirement Plan A qualified retirement plan is one that is designed to observe all of the requirements of the Retirement Income Security Act (ERISA), as well as all related IRS rulings. By observing these requirements, an employer can immediately deduct ... [full story]

Insurance Benefits Leaves of Absence The Family and Medical Leave Act (FLMA) entitles employees at companies with 50 or more employees to take up to 12 weeks of unpaid leave (which may be taken sporadically) each year for a specified list of ... [full story]

Life Insurance It is common practice for a company to provide group term life insurance to its employees as part of a standard benefit package. This requires some extra reporting from a tax perspective, however. If the amount of the ... [full story]

Insurance Continuation Subsequent to Employment Under the terms of the Consolidated Omnibus Budget Reconciliation Act, employees of private sector, state, and local governments who lose their jobs have the right to accept continuing health insurance coverage, as long as the former ... [full story]

Insurance Benefits Insurance benefits may include medical, dental, vision, and life insurance. Deductions are usually taken from every paycheck to help defray the cost of the insurance, either in part or in total. A company may contribute to this cost by ... [full story]

Cafeteria Plans A cafeteria plan allows employees to pay for some benefits with pretax dollars, so that the amount of taxable income to them is reduced. In its simplest form, a Premium-Only Plan (POP) allows employees to take employer-required medical insurance ... [full story]

The 1099 Form The 1099 form is issued to all suppliers to whom a business pays (to quote the IRS): ... at least $600 in rents, services (including parts and materials), prizes and awards, other income payments, medical and health care payments, ... [full story]

Employer's Annual Tip Income Tax Return An employer is required to submit a Form 8027, "Employer's Annual Information Return of Tip Income and Allocated Tips," to the IRS no later than February 28 of each year following the reporting calendar year. ... [full story]

The W-2 Form The W-2 form contains the information needed by employees to file their annual income tax returns with the government. It itemizes the various types of income paid by the employer to the employee during the past calendar year. ... [full story]

Annual Paperwork Reminders There are several documents that the payroll department must issue or process at the end of a calendar year. Place the following paperwork-related items on the payroll activities calendar so they are not forgotten: Remind employees to review their ... [full story]

Travel Time The time spent to travel back and forth from work to home, and vice versa, is not time for which the employer is liable to pay compensation, unless an employee is called away from home for emergency work and ... [full story]

Reduced Interest Loans Reduced Interest Loans An employer may loan money to employees. When this happens, if the amount of the loan is greater than $10,000 and is at an interest rate less than the Applicable Federal Rate (AFR), the difference is ... [full story]

Personal Use of Company Vehicles A number of taxation rules apply if an employee drives a company vehicle for personal use. The basic rule is that personal use of this asset is taxable income to the employee. The following rules apply: If ... [full story]

Outplacement Services An employer may offer resume assistance, counseling, and other outplacement services to employees it has terminated. The value of these services is not recorded as income for the affected employees, unless the employer receives a substantial business benefit from ... [full story]

Moving Expenses Employers may ask employees to move to a different company location. If the employer pays a third party or reimburses the moving employee for actual costs incurred, there is no reportable income to the employee. This applies only if ... [full story]

Meal Breaks Some organizations will pay employees for a fixed amount of time off for a meal break if they work more than a set number of hours in a day. For example, if employees work more than 10 hours in ... [full story]

Golden Parachute Payments Golden Parachute Payments So-called golden parachute payments are made to employees or officers as a result of a change in corporate control or ownership. This type of payment is subject to all normal payroll tax withholdings. In addition, if ... [full story]

Employee Achievement Awards Employee achievement awards can be excluded from employee gross income, but only if the awards are tangible property, given in recognition of length of service with the business or for safety achievement and as part of a meaningful ... [full story]

Education Reimbursement The reimbursement of an employee's educational expenses by the employer is not income to the employee if the education being reimbursed is related to his or her current job and will either serve to maintain or improve the person's ... [full story]

Club Memberships Club dues are taxable income to the employee, except for that portion of the dues that are business related, which must be substantiated. Clubs that fall into this category are airline and hotel clubs, as well as golf, athletic, ... [full story]

Business Expense Reimbursements If an employee submits substantiation of all expenses for which reimbursement is requested, then the corresponding payment from the employer to the employee is not considered income to the employee. Substantiation can take the following forms: A receipt that ... [full story]

Back Pay Back Pay Back pay is frequently paid to an employee as part of an arbitration award, perhaps related to an unjustified termination or an incorrectly delayed wage increase. Whatever the reason for the back pay, it should be treated as ... [full story]

Tips Tips are paid directly to employees by customers for services performed. Employees who receive tips must report them to the employer by the tenth day of the month after the month in which the tips were received, except when total ... [full story]

Commissions An employee earns a commission when he or she secures a sale on behalf of a business. The commission may be earned when an invoice is issued or when cash is received from the customer. The commission calculation may be ... [full story]

Overtime Pay Overtime is a pay premium of 50 percent of the regular rate of pay that is earned by employees on all hours worked beyond 40 hours in a standard workweek. This calculation can vary for individual states, so be ... [full story]

Paying Salaries for Partial Periods Many salaried employees begin or stop work partway through a pay period, so the payroll staff must calculate what proportion of their salary has been earned. This calculation also must be done when a pay change ... [full story]

Computing Pay under the Piece-Rate Plan The piece-rate pay plan is used by companies that pay their employees at least in part based on the number of units of production completed. To calculate wages under this method, multiply the rate paid ... [full story]

Computing Pay under the Hourly Rate Plan The hourly rate plan is by far the most common method for calculating wages for hourly employees. This involves simply multiplying the wage rate per hour times the number of hours worked during the ... [full story]

The Minimum Wage The minimum wage is the minimum amount of money per hour that must be paid to all employees—with some restrictions by type of industry. The minimum wage is set by the federal government, though it can be overridden ... [full story]

The Workweek The workweek is a fixed period of 168 consecutive hours that recur on a consistent basis. The start and stop times and dates can be set by management, but they should be consistently applied. And whatever the workweek is ... [full story]

Workers Paid by a Temporary Agency It is common for companies to ask a temporary agency to send workers to complete short-term jobs. The temporary agency is considered the employer of these workers if it screens and hires them and can ... [full story]