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Posts published in “Withholding”

Priority of Deductions

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There are times when an employee’s actual gross pay (excluding taxable fringe items) is insufficient to accommodate all of their deductions in full.  In those cases where there is not enough net pay, there is an order in which deductions are to be processed until the check is zero.  I am going to cover the basics of that order without going into the details of each specific deduction, as this would end up being a super-sized blog.  Be sure to check out my previous blogs for details on some of the specific deductions.   Deductions are taken in the order below,…

2020 W-4 – Tips and Help for All

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The 2020 Form W-4, Employee’s Withholding Certificate, is very different from previous versions. This is due to the federal tax law changes that took place in 2018 from the 2017 Tax Cuts and Jobs Act.  Check out my prior article with a bit of history and nostalgia of a 30 year old form. https://blog.paymaster.com/here-it-comes-2020-w4-form/ The most significant change is that there is no longer the use of withholding allowances, and the form asks the employee to basically prepare an estimated tax return. Some of the information requested may even be considered intrusive, including income from other sources, spouse income, itemized…

Gifts to Employees – A Taxing Topic

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We all know that when we pay an employee in cash/wages, it is a taxable transaction to the employee.   What is less commonly known is what should happen when something of value other than cash/wages is given.  Gifts such as a Thanksgiving turkey, a $25 store gift card for a job well done, a Caribbean cruise vacation for meeting a sales quota, or even a Rolex watch for an employee’s twenty-year anniversary with the company all have different tax consequences.  Sometimes the exact same gift given under two different situations may be taxed differently. This article will cover the…

Ready or Not, Here it Comes. 2020 W-4

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The W-4 form has remained basically unchanged for many decades.  For a flashback, here is what it looked like in 1990: https://www.irs.gov/pub/irs-prior/fw4–1990.pdf.  Unchanged until now, that is.  The IRS has done a complete revamp of the form for 2020 by adding many additional fields for the employee to complete as well as removing ‘number of allowances.’  You may ask how that can be since the number of allowances basically dictated the amount of federal income tax withheld from a paycheck. You need to see the new form to believe it, and here it is: https://www.irs.gov/pub/irs-dft/fw4–dft.pdf. The form asks the employee…

New Federal Withholding W-4 Form Released

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Whew!  We dodged a bullet… at least for another year.  If you are not familiar with what the 2019 W-4 form could have looked like, then keep an eye out for a future article where we will give it a thorough review as it is now postponed for 2020 by the U.S. Treasury. The new 2019 W-4 form has been published (including the Spanish W-4(SP) version) and not much is changed from the 2018 version. A Form W-4 remains in effect until the employee gives you a new one, so you do not need to obtain a new form each year.  When…

Spring Cleaning? Record Retention Guidelines to Help Clear the Clutter

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A question I am often asked is ‘How long must I maintain my payroll records?’, and the answer is; “it depends”.   Reason being is that there are many different documents that are maintained within the payroll world by a myriad of federal, state, and local agencies, and a lots of overlap.  Some people put a blanket retention policy of seven years across all documents, but in some cases as we will see, even that may not be long enough.  Namely if the records are for an active employee. Let’s take a look at the more popular forms and documents, and bring some order to…

New W-4 – Complex Enough That It Comes With a Calculator

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If you are like me, you have been at the edge of your seat waiting for the IRS to release the 2018 Form W-4, Employee Withholding Allowance Certificate since January 1st.  Well, on February 28th the wait ended, and here is the new form in all four pages of glory.  Yes, four pages.  Double the prior year’s 1 page front and back form. At the end of the day, the certificate itself is still just a 1/3 of the first page where the employee will basically indicate whether they are withholding at Single, Married, or Married, but withhold at the higher…

New Year – New Withholding Forms

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With the recent passing of the new tax law, we will find a significant delay in the IRS’ publishing of the 2018 W-4 Withholding Allowance Form.  In the meantime, anyone hired in 2018 should complete the 2017 form, and they will not need to complete the 2018 form when it is released.  Unless that is, if they want to later change their withholding.  A Form W-4 remains in effect until the employee gives you a new one.  When you receive a new form, begin withholding no later than the start of the first payroll period ending on or after the 30th…

Employing Family – A Potential Tax Savings

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While there are many factors to consider when hiring family members, there may be a few advantages from the payroll tax perspective.  But, only if you are aware and perform the necessary overrides in your payroll system or notify your payroll service provider. Let’s break this down into the types of family relationships as the advantages are different for each. Parent employs Child – If the child is under the age of 18 and works in their parents business, their wages are not subject to Social Security (OASDI) or Medicare taxes  This only if the business is setup a sole proprietorship…

Death of an Employee and Wages

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The death of an employee is a difficult time for any business.  Grieving co-workers, loss of productivity, and finding and training a replacement are just a few of the factors a business will need to deal with, but one area that is often mishandled is the treatment of wages and payroll. How payroll is handled is all about timing, and I can break it down into three distinct parts. Part 1 – Wages earned and paid prior to the death For wages paid to the employee prior to the death, where the payroll check remains uncashed, a stop payment should…