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]

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]

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]

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 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]

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]

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]

Stock options [3] Stock options  A stock option gives an employee the right to buy stock at a specific price within a specific time period. Stock options come in two varieties: the incentive stock option (ISO) and the nonqualified stock option (NSO). Incentive ... [full story]

Stock Purchase Plans Stock Purchase Plans Some companies offer stock purchase plans that allow employees to buy company stock at a reduced price. The purchases are typically made through ongoing deductions from employee paychecks, and are usually capped at a specified percentage ... [full story]

Workers' Compensation Benefits Businesses are required by law to obtain workers' compensation insurance, which provides their employees with wage compensation if they are injured on the job. This insurance may be provided by a state-sponsored fund or by a private insurance ... [full story]

W-4 Form W-4 Form When an employee is hired, he or she is required by law to fill out a W-4 form, which can be done either on paper or in an electronic format. An employee uses this form to notify the ... [full story]

Federal Income Taxes An employer is required by law to deduct income taxes from employee pay. If it uses a payroll supplier, then the calculation of the appropriate income tax amounts is completely invisible to it, since the supplier handles this ... [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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

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]

Supplemental Pay Several of the alternative tax calculation methods just described are used because the amount withheld from employee pay for the year-to-date is higher than will be needed by the end of the calendar year. This may be caused by ... [full story]

Sick Pay Sick Pay In general, sick pay made to employees requires all of the Social Security, Medicare, and income tax withholdings that are calculated for normal wages; however, there are a few exceptions. For example, if an employee dies and sick ... [full story]

Employee Portion of Insurance Expenses Employee Portion of Insurance Expenses Most businesses offer some form of medical and related insurance to their employees. This can include medical, dental, vision, short-term disability, long-term disability, life, and supplemental life insurance coverage. An employer may ... [full story]

Garnishments for Unpaid Taxes If an employee does not pay his or her federal or local income taxes, the employer may receive a notification from the IRS to garnish that person's wages in order to repay the taxes. The garnishment will ... [full story]

Loan Repayments Employees may either have loans payable to the company, or the company may have obtained loans on their behalf. For example, a corporate officer may have been extended a loan in order to move to a different company location ... [full story]

Pensions and Other Savings Plans An employer may offer several types of savings plans to its employees. In its simplest form, a business may arrange to make regular deductions from employee paychecks and deposit these funds in any number of pension ... [full story]

Student Loans The government can mandate the garnishment of an employee's wages in order to pay back the overdue portion of an outstanding student loan. Garnishment orders can be issued either by the Department of Education or a state guarantee agency, ... [full story]